Mortgage Protection Insurance
Protecting you and your home...
What does Mortgage
Accident & Sickness
With mortgage payment protection you can cover the risk of having to take time off work due to illness or injury, thus ensuring you can keep up with your repayments.
Some MPPI plans also have the option where the policy can payout should you suffer forced redundancy, or there are some policies that cover unemployment only.
With mortgage life insurance you can cover the amount outstanding on your loan should you pass away, thus providing your family with the means of repaying the loan.
Mortgage Payment Protection
Stage 1: You cease working due to Accident, Sickness or Unemployment.
Stage 2: You make a claim with the insurer.
Stage 3: The insurer pays out a monthly benefit after your deferred period and continues to pay out until you return to work or reach the maximum payout length.
Mortgage Life Insurance
Stage 1: You pass away during the policy term.
Stage 2: Your family make a claim with the insurer.
Stage 3: The insurers pays out a tax free lump sum.
Do I need
When deciding if mortgage protection insurance is worthwhile it makes sense to know the facts about what risks we all face:
The Incapacity Risk:
1 in 10 people have been unable to work due to illness or injury for +6 months (The Guardian/Unum Survey 2011).
The Unemployment Risk:
1 in 5 people have been made redundant at some point during their working life (Met Life, 2012).
The Death Risk:
1 in 9 persons aged 20 years now will not live to reach their retirement at age 65 (ONS Interim Life Tables, 2010).
Mortgage Payment Protection
1. Level of cover - It is usually possible to cover up to 125% of your monthly mortgage payments.
2. Deferred period - This is the length of time you would need to be off work before the policy starts paying out. Deferred periods range from 30 days to 12 months.
Mortgage Life Insurance
1. Basic Cover Details - As you are protecting a mortgage loan the policy sum assured and length should match the outstanding amount and term of the loan.
2. Level or decreasing cover - Level term life insurance is usually used to cover an interest-only mortgage and decreasing term life insurance for a repayment mortgage.
Mortgage insurance plans are ultimately designed to help protect your mortgage loan from the risk of default by covering you for accident, sickness, unemployment and even death.
It is likely that your home is the largest investment you have made, and as such it is important to ensure that you have adequate mortgage protection insurance to cover you for these risks.
By combining Mortgage Payment Protection Insurance and Mortgage Life Insurance and Critical Illness Cover you are covered against a range of both short term and long term risks.
These risks include protecting your monthly mortgage repayments against short-term accident, sickness or unemployment and the unfortunate event of death during the term of the mortgage loan.
This type of home mortgage insurance covers your monthly loan repayments from the risk of accident, sickness and unemployment (forced redundancy).
If you are unable to work for any of these reasons the plan pays a monthly benefit until you either return to work or reach the full benefit term of either 12 or 24 months.
It is possible to cover 100 per cent of your monthly repayments plus an additional 25 per cent cover for other monthly home costs, such as council tax and utility bills.
If you have a joint loan each you can apply for joint mortgage insurance covering the full repayment each or split the mortgage insurance protection proportionately to each partner's contribution to household income.
Life insurance for mortgages is designed pay off the outstanding balance on your loan should die within the policy term.
The payout from the policy can be used for anything you so wish without restriction, whether that be for mortgage repayments, utility bills or general living expenses.
Decreasing Term Life Insurance
If you have a principal repayment mortgage loan this is usually the most suitable option. With such a mortgage protection life insurance plan the level of cover declines over time aligning with the amount outstanding on your loan.
If you have taken out a mortgage with your partner it is possible to take out joint life insurance, which would payout should either partner pass away.
Level Term Life Insurance
If you have an interest-only mortgage then a level term insurance policy is usually the most suitable option. With this type of mortgage life insurance cover the level of protection remains fixed throughout the life of the plan.
There is an option to include indexation which ensures your sum assured rises year on year in line with inflation by tracking with the Retail Price Index.
With both level and decreasing term mortgage life cover it is possible to include critical illness insurance, which means that the plan would also payout if you were to suffer a serious illness or injury. Plans usually cover over 35 medical conditions, including cancer and heart attack.
It is important to understand the definition of the illness on which the insurers will pay a claim as the policy wording can differ significantly from insurer to insurer.
As independent mortgage life insurance brokers we are ideally placed not only to obtain you the cheapest quote from our large panel of insurers but also to provide impartial advice, ensuring that you get the right cover for your needs.
Whether you have a quick policy question or require a complete review of your mortgage protection set-up we are here to help. It is our job to ensure you have all the information needed to make as informed decision as possible.
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