What is Mortgage Protection?

Mortgage Protection is a form of term life insurance that covers the cost of your mortgage. So, should you pass away before you finish paying off the cost of your home, your family would receive a lump-sum pay out to cover the remaining cost of the mortgage.

Generally speaking, with this type of policy, the level of cover gradually reduces with time as your mortgage decreases. Since the pay out reduces over the duration of the policy, this means that the monthly premiums are often lower than other types of policies.

Due to this, Mortgage Protection Insurance offers an affordable way to make sure that your dependents don’t have the financial burden of your mortgage, should the worst happen.

Level Term vs Decreasing Cover

Mortgage Protection Insurance is available as Level Term or Decreasing Cover. The best one for you will depend on your needs.

A mortgage protection policy with decreasing cover will go down over time. Don’t worry, it won’t just drop off a cliff and fall over night. As you pay off your mortgage and it gets lower, so does the life insurance cover.

So, for instance, if your mortgage was £150,000 when you took your policy out, your mortgage protection policy would pay out £150,000 should you have passed the next day. However, if you passed away 10 years later when your mortgage was now £80,000, the pay-out would now be £80,000.

With a Level-Term policy, the pay-out amount stays the same regardless of how much of your mortgage you pay off. If your mortgage was £150,000 when you took the policy out and it was down to £50,000 by the time you died, the insurer would still pay out the £150,000. Level-Term policies offers the chance to pay-out a little extra for your dependents should the worst happen.

In almost all cases, decreasing cover is a lower rate. This means that you can get affordable cover to keep your family financially secure. If you can afford a little extra on premiums though, it’s worth considering that little extra safety and security package for your family should the worst happen.

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