With mortgage life insurance cover, in the event of the mortgage holder passing away, the outstanding mortgage will be paid off.
When you pick up the keys to your new property nobody is thinking about what would happen to their home if the worse should happen and they were to pass away before the mortgage had been repaid.
Given the amount of money that is borrowed under the terms of a mortgage failure to consider what would happen in this eventuality could have implications for your family or spouse. This could ultimately result in the repossession of the property if your loved ones were not in a position to make the mortgage repayments without you.
Mortgage life insurance – also known as “mortgage life assurance”
Mortgage Life Insurance, sometimes tellingly named ‘Mortgage Life Assurance,’ is essentially a form of life insurance designed to protect your mortgage and property. Simply it means that, in the event of the mortgage-holder passing away, the insurance policy would pay out enough capital to cover the remainder of the mortgage outstanding and, dependent on the policy, also some extra money to help with other expenses. This piece of mind can be tailored to your circumstances around three main forms: ‘Decreasing Term;’ ‘Level Term;’ and ‘Whole of Life Cover’.
The types of mortgage life insurance cover
‘Decreasing Term’ means that because your mortgage decreases as you make your monthly repayments so too does the amount that would be paid out in the result of a claim. It links the amount that your mortgage is insured for with how much is actually left to repay meaning that your monthly payment stays the same. This enables you to budget effectively for your insurance payments; it is only suitable for those who are paying both the capital and interest off the mortgage because it is relative to the actual capital outstanding.
‘Level Term’ also provides you with a fixed monthly repayment that enables you to manage your finances easily. Although generally more expensive because the sum that is insured remains the same regardless of how much of the mortgage you repay, this type of ‘Mortgage Life Insurance’ has the benefit of often building up a surplus of capital. This provides extra cash, not tied into mortgage repayments, should a claim be made on the policy.
‘Whole of Life Cover’ can be linked to other investments, such as pensions, and means that the policy could be taken out as a lump sum if you pass away.
In addition to the flexibility of the three forms of Mortgage Life Insurance there are other elements that can be added which makes it the perfect form of insurance for homeowners who want protection tailored to their individual needs. Premiums are calculated on an individual basis meaning that you can be assured that you are paying a fair price for your piece of mind. Optional extras also include the possibility of putting a ‘waiver’ onto your premium meaning that if you were unable to work, for instance because of sickness, accident or unemployment, you could suspend your monthly Mortgage Life Insurance. The flexibility, benefits and ease of Mortgage Life Insurance means that they are a safe means of securing your home.
If you would like free initial advice about the different mortgage protection and / or life insurance options available please contact Ascot Mortgages – we are will be happy to explain things in a clear, unbiased and helpful way.
There are other providers of Payment Protection Insurance [Short-Term Income Protection] and other products designed to protect you against loss of income. This will typically cost £3 per month for every £100 of benefit. For impartial information about insurance, please visit the website at www.moneymadeclear.org.uk