Mortgage Protection Life Insurance

Mortgage Protection Life Insurance

By Claire Bowes

Having a good life insurance policy in place to protect your property in the event of your death is vital. Your life insurance policy will ensure that this problem is eliminated, with the mortgage balance being paid in full upon your death.

The main types of mortgage life cover

The type of mortgage life insurance cover that you require will depend upon what type of mortgage you have, a repayment or an interest only mortgage. There are two main types of mortgage life insurance cover, which are:

§ Decreasing Term Insurance

§ Level Term Insurance

Decreasing term insurance

This type of mortgage life insurance is designed for those with a repayment mortgage. With a repayment mortgage, the balance of the loan decreases over the term of the mortgage. Therefore, the sum of cover with a decreasing term insurance policy will also go down in line with the mortgage balance.

With the decreasing term insurance, the cover is usually taken out over the term of the mortgage, and payment is made should you die during the term of the policy.

Level term insurance

This type of mortgage life insurance cover is for those that have a repayment mortgage, where the principle balance remains the same throughout the term of the mortgage and the repayments made by the property owner cover the interest payments on the mortgage only.

As with decreasing term insurance, there is no surrender value, and should the policy end before the insured dies no payout will be awarded and the policy becomes null and void.

Terminal illness benefit

Both of the above types of cover normally include terminal illness cover, which means that the mortgage is cleared should you be diagnosed with a terminal illness rather than waiting until you actually die.

Critical illness cover

Critical illness cover is another type of insurance policy that can be added on to either of the above mortgage life insurance polices and provides an extra element of protection and peace of mind. With critical illness cover you will be eligible for a payout in the event that you are diagnosed with a critical illness. The illnesses that are covered by this type of policy are defined by the insurer so you should ensure that you check the terms when taking out critical illness cover.

Summary

As indicated by the features of the two main types of mortgage life insurance cover, the policy you go for will depend largely upon the type of mortgage you have. Both types of cover offer value for money, with some really low cost deals available. For total peace of mind it is always advisable to go for a policy with critical illness cover incorporated into it.

Having some form of mortgage life cover is essential to protect your home and your family.