Mortgage Life Insurance Policy
Mortgage life insurance cover will pay off an outstanding mortgage if the mortgage holder dies. Of course, when you move into your new home, probably the last thing on your mind is what would happen in the event of the mortgage payer’s death. Should it happen though, your family or dependents will be responsible for continuing to pay the monthly mortgage repayments.
Mortgage life insurance cover gives you the peace of mind in knowing that the mortgage will be paid off and won’t burden your dependents should you not be around.
There are three basic types of mortgage life insurance: decreasing term insurance, level term insurance and whole of life insurance.
Decreasing term insurance
Decreasing term insurance shadows your mortgage. If your mortgage is for 25 years, then a decreasing life insurance policy taken out at the same time as arranging the mortgage will also last 25 years.
The policy pays out the amount left on the mortgage at the time of death. For example, if the mortgage holder dies after a year and the mortgage owed is £150,000, then that is the amount paid out. If a death is near the end of the mortgage with just £15,000 owing, then the policy will pay £15,000.
Most decreasing term insurance policies come with what is called a mortgage interest rate guarantee. As long as the mortgage interest rate is below this guarantee, the whole of the outstanding balance will be paid off.
Level term insurance
With level term insurance, the sum paid out is fixed for the whole length of the mortgage. If the sum insured is £200,000, then this will be paid out irrespective of when the mortgage holder dies.
If the mortgage holder dies near the end of the mortgage period with £20,000 owing, then the insurance will still pay out £200,000 or whatever level term insurance amount has been arranged.
Whole-of-life insurance has no fixed term and lasts until the policyholder dies, which could be after the mortgage has been repaid.
How to buy mortgage life insurance cover
The three types of mortgage life insurance provide a number of options. Other conditions can be added to a mortgage life insurance policy too, such as a waiver that suspends premiums if the policyholder is out of work through redundancy, sickness or an accident.
You can also add critical illness cover, which pays out if you have to leave work because of a serious illness such as a heart attack, stroke or cancer.
Premiums will depend on the type of cover you require, and your age and health will affect the cost. Premiums for heavy smokers will cost more.
Choosing which mortgage life insurance is best for your circumstances is not easy. This is why it pays to ask Ascot Mortgages for financial advice. We can discuss all your options and match the right policy to your individual requirements.
Contact Ascot Mortgages today to receive an insurance quote in a matter of minutes.