For most households, the mortgage is their largest debt. If the income of the main householder ceases due to a job loss, then it may be difficult to keep up with the payments.
Of course, when mortgage arrears mount up, your home is at risk. Mortgage insurance provides the peace of mind of knowing that the mortgage can still be paid if there is a loss of income.
Some mistakenly think that state benefits will cover their mortgage, when in reality mortgage help from benefits is very limited. The most that will be paid is the interest on the mortgage, and there is a long waiting period before payments start. Private insurance is readily available and is good value for money.
Mortgage payment protection insurance
Mortgage payment protection insurance pays your mortgage payments when you are off work. The amount the policy costs is dependent on your monthly mortgage repayments. Some policies will pay out more than the mortgage payments so that other household bills can be covered.
Most policies have a waiting period before money is paid. This can be from 30 days to 180 days, with long waiting period policies costing less. If your employer pays you sickness benefit for a time, then you may want to choose a policy that pays out when the sickness benefit period ends. Most policies will have a maximum period in which payments will be made.
Mortgage payment protection insurance will cover you if you lose your job through illness or an accident, but some policies will also include redundancy cover.
Mortgage life insurance
The worst-case scenario for a family is when the main income earner dies. As well experiencing grief, dependants can be faced with financial uncertainty and may risk losing the family home if they cannot afford to pay the mortgage.
Mortgage life insurance pays off the remaining balance of the mortgage on the death of the policyholder. Mortgage life insurance is a decreasing policy, which means that the amount paid out decreases as the mortgage is paid off each month. If the mortgage is paid off at the end of the mortgage period, then no money is paid out.
An alternative is life insurance that pays out a fixed sum on death. The amount of cover needed can be calculated to pay off the mortgage, as well as providing extra money for dependents to pay other household bills.
Other insurance cover
Critical illness cover and income protection insurance pay out a fixed regular sum of money when the policyholder is either ill, or loses their job due to sickness or injury. The money paid out is not tied to a mortgage, but can be used to repay the mortgage during a period of unemployment.
How to buy mortgage insurance
Whatever type of insurance you choose to cover your mortgage, the best place to buy a policy or benefit from expert mortgage insurance advice is through a broker.
Talk to Ascot Mortgages today for help and advice. We specialise in matching the right mortgage insurance policy to your individual circumstances.