Life insurance for mortgage protection is something that you should consider seriously.
The average UK house price was £281,000 in April 2022 ( Source: Office of National Statistics) which means that most mortgages are a significant commitment when taking out the mortgage. If you have children and a partner, then protecting them is a high priority.
Having life insurance when you take out a mortgage is not always compulsory, but some lenders make it a pre-condition.
So, what are some of your options?
Why should you consider mortgage life insurance?
Your lender may make recommendations on the type of cover you should take out, but it is a good idea to look at a range of options before deciding. Taking advice at an early stage is a good idea.
The main advantage of Mortgage life insurance is that it will protect your home investment in the case of death. Your beneficiaries must use the insurance monies to pay off the mortgage so there is little danger of the money being used for other purposes.
The disadvantage of mortgage life insurance is that the cover is limited to your mortgage. Theis means that the policy only lasts as long as your mortgage. If you want to have protection for amounts greater than your mortgage, it is a good idea to consider a policy that gives you wider cover.
Joint life insurance may be better for you
Taking out a joint life policy is also something that you should consider at this stage. The death of you or your partners could have a significant financial impact depending on your circumstances.
A lot will depend on whether you are both are in employment and especially if you have children. The loss of either partner could have a very material impact.
Alternatives or additions to life insurance to consider
There is a range of policies that you could consider alongside or instead of life insurance.
The options include the following:
- Decreasing term life insurance
- Life insurance with critical illness
- Critical Illness cover
There are other alternatives available, and it is best to take advice at an early stage.
What is Decreasing Term insurance for mortgage protection?
Decreasing term insurance is a policy where the amount paid out by the insurer falls in line with the level of your mortgage. It is designed to cover what is left of your mortgage. It is designed to be one of the lower cost life insurances you take out.
What is Critical illness insurance cover?
Critical illness is very different to life insurance we have discussed above. The cover is well described by the Association of British Insurers (‘ABI’).
“Critical illness insurance provides for payment to be made to a policyholder if they are diagnosed with one of the conditions that is specified in their policy” ( Source: ABI)
“The three core conditions covered by all critical illness insurance policies are cancer, heart attack and stroke” ( Source: ABI)
This cover normally pays a lump sum if you become too ill to work.
Take advice on mortgage protection at an early stage
Life insurance for mortgage protection is something that you should consider if you want to protect your partner and your family. There are also other forms of cover that you may want to consider.
At My Life Insurance Online we are always available to give advice and help.
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