Your house is a big investment - probably one of the
biggest you're every likely to make. It is also the place that you and
your loved ones call home; a shelter and haven from the outside world.
That's why it is so important to ensure that your home and family are
protected in the event of your death.
Mortgage Protection
Insurance Cover.
It's not a topic that any of us like to dwell on, but the sad fact
is that should you die and the family are no longer able to afford
repayments on the house, they will lose the property and the roof
from over their heads.
Having a good life insurance policy in place to protect your
property in the event of your death is vital. When you die, your
family will have enough to worry about without the added stress
of how they are going to hold on to the family home. 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 |
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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.
So, the amount for which your life is insured should match the balance
outstanding on your mortgage, which means that if you die your policy
will hold sufficient funds to pay off the remainder of the mortgage
and alleviate any additional worry to your family.
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. Once the policy has expired, it becomes null
and void, so you will receive nothing at the end of your policy if you
are still living. There is no surrender value on this type of cover,
but it does provide a cost effective means of protecting your home and
family during the life of your mortgage.
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.
The sum for which the insured is covered remains the same throughout
the term of this policy, and this is because the principle balance on
the mortgage also remains the same. Therefore the sum assured is a fixed
amount, which is paid should the insured party die within the term of
the policy. 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. This helps
to ensure that you do not have the additional worry of trying to meet
repayments when a terminal illness takes away your ability to work and
earn money, and at a time when the whole family has enough to worry about
without having to stress about meeting mortgage repayments.
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. This
type of cover can also be taken out as a stand-alone policy, but
usually proves much better value if simply added on to a main life
insurance policy.
With critical illness cover you will be eligible for a payout
in the event that you are diagnosed with a critical illness. If
you then go on to recover from the critical illness, the payout
is yours to keep but the policy becomes null and void following
your claim. 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.
Adding critical illness cover to your policy will only increase
your repayments by a small amount, but can provide valuable protection
if you are diagnosed as critically ill and are therefore unable
to work. With your mortgage repaid from the payout of this policy,
you will not have the additional worry of trying to keep a roof
over your head at a time when you should be concentrating on trying
to make a recovery. |
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