I have just bought a house and wanted to know what type of insurance I need for mortgage protection purposes? What types of cover are commonly taken out?
Firstly, it is not usually compulsory to take out Mortgage Insurance but it does make sense to consider protecting both yourself and your family should something happen to you and you are therefore unable to keep up with your mortgage repayments.
What types of cover you need will depend on your specific circumstances and what insurances you currently have in place, either taken out personally or provided as part of an employee benefits package by your employer. This is why it usually makes sense to speak to a financial adviser.
However, the most common types of mortgage protection usually consist of mortgage life insurance with critical illness cover and mortgage payment protection insurance (MPPI).
Mortgage Life Insurance is a type of life cover designed specifically to repay your mortgage should you die within the mortgage term. As the policy pays out a lump sum the mortgage can be repaid upon death by your partner/family, thus leaving the house debt free.
Critical Illness Cover is often added to Mortgage Life Insurance so that the plan would also pay out a lump sum should you suffer a serious illness or injury. Most plans cover around 40 specific conditions including heart attack, stroke and cancer. This type of cover would allow you to repay the loan should something serious happen to your health.
Mortgage Payment Protection is designed to payout a monthly benefit to cover your loan repayments should you have to cease working as a result of accident, sickness or unemployment. It is important to note that these plans can usually only payout for up to 12 months, thus making critical illness cover important for long-term illness protection.
Please note that all these policies can be taken out as joint plans with a partner if you have a joint mortgage together.
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