Mortgage Protection Insurance

What is Mortgage Protection Insurance?

Mortgage protection insurance is a type of insurance that helps protect your loved ones and your home in case something happens to you.

How does it work?

  1. Coverage for the Mortgage: If you have a mortgage on your home, and you pass away or face certain unexpected events like a serious illness or disability, mortgage protection insurance can help cover the remaining balance on your mortgage. This means that your family won’t be burdened with the mortgage payments during a difficult time.
  2. Temporary Coverage: It’s usually a temporary insurance policy that is designed to pay off the mortgage if you pass away or meet specific criteria, depending on the policy terms.
  3. Premiums: Like any insurance, you’ll need to pay regular premiums to maintain coverage. These payments are often based on factors like your age, health, and the amount of your mortgage.
  4. Peace of Mind: Mortgage protection insurance provides peace of mind, knowing that if something unexpected happens to you, your family won’t have to worry about losing the family home due to financial strain.

It’s important to note that mortgage protection insurance is different from homeowner’s insurance, which typically covers damage to the property. Mortgage protection insurance is specifically focused on paying off the mortgage in certain circumstances outlined in the policy.

Our team will recommend a suitable and affordable mortgage protection package to give you the security of knowing that you can continue your monthly payments or pay off your mortgage in full should your circumstances change dramatically. Policies can be taken out on a number of different bases.

Types of mortgage protection insurance available

Single Life

This plan is taken out in one person’s name. For policies providing life cover only the sum assured will be paid out in the event that person dies. Critical illness cover could also be included.

Joint Life First Death

This plan is taken out in joint names. For policies providing life cover only the sum assured will be paid out when the first person dies. If the policy provides life or critical illness benefit the policy will pay out when the first person suffers the earlier of a specified critical illness or death.

Joint Life Second Death

This plan is taken out in joint names. For policies providing life cover only the sum assured will be paid out when the second person dies. If the policy provides life or critical illness benefit the policy will pay out when the second person suffers the earlier of a specified critical illness or death.

Joint Life Double Cover

The plan is taken out in joint names, but within the joint plan there will be a separate policy for each life assured. This means the plan will pay out separately on the death (and/or critical illness as appropriate) of each life assured. This option offers flexibility in that a different sum assured can be chosen for each person.

Life of Another

The plan is taken out by one person (a) on the life of another person (b). For policies providing life cover only the sum assured will be paid to (a) on the death of (b). For this policy to be taken out there must be insurable interest between the two parties.

Premiums can be on either a guaranteed or reviewable basis. If they are on a guaranteed basis the premiums will remain the same throughout the term. If they are on a reviewable basis the premiums will be reviewed after a certain time (usually 5 years) at which point the premium could rise.

The premium at outset tends to be lower under the reviewable option, however these could rise to above the guaranteed premium rate on review. For life insurance, critical illness insurance, income protection and unemployment cover we offer products from a range of providers. We can arrange protection insurances for you even if you have not arranged your mortgage with us.

Level Term Assurance

A level term assurance plan is designed to provide you with life cover for a specified period of time, should you die within the term of the policy the plan will pay a tax-free lump sum. There is no investment element, so if the plan comes to an end, for example, if premiums cease, there will be no value to the policy. The level of life cover will remain the same throughout the term of the contract. This type of policy is normally suited to an interest-only mortgage.

Decreasing Term Assurance

A decreasing term assurance plan is designed to provide you with life cover for a specified period of time, should you die within the term of the policy the plan will pay a tax-free lump sum. There is no investment element, so if the plan comes to an end, for example, if premiums cease there will be no value to the policy. The level of life cover will decrease at a set rate over the term of the policy. This type of policy is normally suited to a repayment mortgage.

Family Income Benefit Plan

A family income benefit policy is designed to provide you with life cover for a specified period of time. Should you die within the term of the policy the plan will pay a tax-free regular income rather than a lump sum. Payments will be made between the date of death and the end of the term, when the policy will come to an end. Premiums tend to be cheaper due to this potentially restricted payment time. There is no investment element, so if the plan comes to an end, for example, if premiums cease there will be no value to the policy.

Income Protection

Income protection is designed to pay out a weekly or monthly sum to you in the event of an accident or sickness, this is calculated on your earned income. These payments are designed to cover your mortgage payments.

Unemployment Protection

Unemployment protection will pay out a monthly sum to you if you are made redundant.

Critical Illness

This plan will pay out the sum assured on diagnosis of certain types of critical illness, e.g. heart attack, stroke and cancer. Providers will have a definition for each illness and most follow the Association of British Insurers (ABI) definitions. Critical illness cover can be on a stand-alone basis, or can be combined with life cover. Where it is combined the critical illness payment can be either instead of, or in addition to a payment upon death.

Trusts

Life policies can be placed in trust so that the proceeds from the policy will not fall into your estate. This can be beneficial for inheritance tax planning. The following is a brief description of the main types of trust that could be used:

  • Absolute trust – under an absolute trust the beneficiaries are fixed at the outset and cannot be changed
  • Flexible trust – under a flexible trust the beneficiaries can be changed should this be required
  • Split capital trust – under a split trust any critical illness or terminal illness benefit would be payable to the policyholder while any death benefit would be payable to the trustees to hold on trust for the beneficiaries.

Buildings & Contents Insurance

Mortgage lenders will not allow a purchase or remortgage to complete without having adequate buildings insurance in place. We can arrange your buildings and contents insurance for you, using a range of product providers.

People before Property

At a time and on a day of your choosing, please contact one of our property experts to book an appointment. Initial consultations are free and last around 30 minutes. Please reserve your spot by clicking the button below

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