Life Insurance, Mortgage Protection, Uncategorized

Mortgage Protection Explained

We took a look at the top questions and got the answers you’re looking for. Mortgage protection, what is it?  How much does it cost? & why are there so many different options?

Whether buying your first home or re-insuring an existing mortgage, choosing the right broker for you is often just as hard as choosing the right policy. With us, we have 2 offerings non-advised & advised applications. If you know exactly what you need simply submit the details and we’ll send you your quotes and an easy online application form. Or if you have more questions than answers we offer free no obligations online consultations. One of our advisors will answer all of your questions & make recommendations for you.

But that’s enough about how we work, I’ll write more about that in the future. Today I’m going to start answering some of your most commonly asked questions. This is our breakdown of mortgage protection, to help you make a more informed decision the next time you’re shopping for an insurance policy. We will add to this list for time to time, if you have a question you’d like us to answer for you fee free to ‘get in touch’

Top Tip

Your mortgage provider cannot refuse you a mortgage because you don’t take their mortgage protection insurance.  You are free to seek 3rd party providers to ensure you are getting the best deal for you.
However, you will need to have a policy in place before you can gain access to your mortgage.

What is mortgage protection?

Mortgage protection is an Insurance policy which does one of 2 things it either pays off your mortgage in the event that you or another policy holder dies or pays your mortgage repayments monthly if you or another policy holder fell seriously ill during the term of the plan. The term of your cover is usually set to match the term of your mortgage. If you have a joint mortgage both people are required to have mortgage protection. Offering you peace of mind that neither you nor your dependants would have to worry about the repayment.

What are the different types of insurance policies you can put in place as mortgage protection?

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  • Life cover is an insurance policy that pays off your mortgage if you or another policy holder dies during the term of the policy. If you have a joint mortgage, both people need mortgage protection insurance. It runs for the same length of time as your mortgage. So, if you take out a mortgage over 20 years, your mortgage protection insurance must also be in place for 20 years.
  •             Critical illness or serious illness cover pays out a lump sum if you develop one of a range of listed serious medical conditions. The conditions covered are very specific and normally include certain types and stages of cancer, strokes and heart attacks, but each policy is different. It may be sold alongside life insurance or separately. This will be more expensive than other types of cover.
  •               Income protection is designed to replace a proportion of your income should you be unable to work due to an accident or illness. Long-term income protection will cover you until you reach retirement, while cheaper shorter-term income protection (STIP) policies will only pay out for a set period of time usually 2 years.

How you structure your mortgage policy can affect your premium. 

 Reducing Term Cover: As you pay more off your mortgage, the amount that the policy covers reduces in line with the outstanding balance of your mortgage. Under normal circumstances the policy will end once the mortgage is paid off. It is the most common and the cheapest form of mortgage protection. Generally, your premium does not change, although the level of cover reduces.

-Level Term policy: The amount you are insured for and the premium you pay remains level. This is usually used in the case of interest only mortgages as it gives you the same amount of cover throughout the term of the mortgage. If you die before your mortgage is paid off, the insurance company will pay out the original insured amount. This will pay off the mortgage and any remaining balance will go to your estate.

I get that this can feel overwhelming, but if you still have more questions check out our FAQ section or feel free to get in touch and we’ll get back to you ASAP.

Thanks for reading
Bradley Pinto