Answered by Andrew Jenkinson
Yes, mortgage protection life insurance pays out in case of death and is specifically designed to cover mortgage loans.
This type of cover comes in two main forms.
The first form is decrease term mortgage life insurance and is designed to cover a capital/principal repayment mortgage.
What is Decreasing Mortgage Life Insurance?
With this plan the level of cover declines over time so if you die there should be enough cover contained within the plan to pay off the home loan in full (i.e. cover decreases approximately in-line with the amount of debt outstanding on your repayment mortgage).
As the level of cover declines over time this is the most cost effective (and popular) method of gaining cover. Although it varies from insurer-to-insurer, there should be enough cover contained within the plan provided that your mortgage interest rate does not go above 8 per cent (more info: how decreasing term insurance works).
The second form of cover is level term life insurance and is usually taken out to protect an interest-only mortgage against the event of death.
What is Level Term Mortgage Life Insurance?
With this type of mortgage insurance the level of life cover remains fixed over the term of the plan, along with the amount of debt outstanding on your loan.
With both types of cover it is possible to take out a joint mortgage life insurance plan so if either partner on a joint mortgage were to pass away the loan could be repaid in full, thus avoiding the remaining partner being left with a potentially unmanageable debt.
It is also possible to add critical illness cover to the plan so the policy would also payout in the event of a ‘critical illness condition’ (such as a heart attack) in addition to covering death.
Frequently Asked Mortgage Protection Insurance Questions
Josh at Drewberry was extremely helpful and friendly in answering my many questions about the policy before I went ahead.
Drewberry was the only website I could find that would give me an indicative Relevant Life cover quote. Victoria at Drewberry was very helpful throughout the whole application process.
They gave me good advice and weren’t pushy! I felt that I was getting what I asked for and I’m happy with the final product that I bought.