Is Mortgage Insurance Worth It?

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Mortgage Life Insurance
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Receive an upfront cash lump sum for your loved ones to pay off the mortgage in full should you pass away  during the term of your mortgage

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Mortgage Payment Protection
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Receive an income to cover your monthly mortgage repayments should you be unable to work due to  accident, sickness or unemployment 

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10/04/2019
10 mins

What Does Mortgage Insurance Cover?

When asking yourself if Mortgage Protection Insurance is worth it, you’ve got to assess the risks you’re protecting your mortgage against.

The two main risks to consider are that you’ll be out of work due to illness, injury or unemployment and won’t be able to make the repayments or, sadly, you pass away during the life of the mortgage and your family can’t afford to repay the loan.

There are two types of Mortgage Protection cover to insure your mortgage against these eventualities:

  • Mortgage Payment Protection Insurance
    Insures your monthly mortgage repayments over the short-term if you can’t work due to accident or sickness (and potentially unemployment depending on you and your policy)
  • Mortgage Life Insurance
    Repays your entire mortgage if you pass away, which your loved ones may choose to use to remain in the family home even if they wouldn’t be able to keep up with the mortgage otherwise.

However, how do you know if either type of Mortgage Insurance cover is worth it for you?

Is Mortgage Protection Insurance a Requirement for a Mortgage?

Mortgage Protection Insurance is not compulsory. Sometimes you may be made to feel like it’s mandatory to get Mortgage Insurance when you take out a new mortgage but it’s not the case.

However, the reality is that many people prefer to have Mortgage Insurance to protect their home and their loved ones against any misfortunes life might throw their way.

So while Mortgage Protection isn’t technically a requirement, you might want to consider:

  • If you were out of work, could you keep up with your mortgage repayments?
  • Do you have enough in savings to continue meeting your mortgage payments and keep a roof over your head while you recover and / or find a new job?
  • Alternatively, if the worst happened and you passed away? Could your loved ones feasibly afford mortgage repayments?
  • Or would your family be saddled with a large, possibly un-payable, mortgage debt?

If you can’t say for certain how you’ll manage in these situations, then it may be that you need to look at insuring your mortgage.

It’s often one of the easiest ways to reduce the risk of your home being repossessed if you were to suffer an accident, sickness, become unemployed or pass away.

Michael Barrow
Independent Protection Expert at Drewberry

Is Mortgage Payment Protection Insurance Worth It?

Mortgage PPI protects your mortgage against the risk of illness or injury (and possibly unemployment depending on you and your policy).

No one needs to be reminded that a mortgage is a major, long-term financial commitment with a lot at risk if you can’t make your monthly repayments because you can’t work. You and your family could lose your home at a time when you’re already vulnerable.

Essentially, anyone who is worried what would happen if ill health stopped them working, or if they were made redundant by their employer, could potentially benefit from Mortgage Payment Protection.

What’s the Risk of Losing My Income?

Is MPPI the Best Mortgage Insurance Option?

Whether or not Mortgage PPI is the best Mortgage Insurance for you will depend entirely on your circumstances. However, it’s worth noting that Mortgage Payment Protection Insurance is not your only Mortgage Insurance option that will cover your mortgage repayments if you’re out of work due to accident or sickness.

Is Mortgage Life Insurance Worth It?

With Mortgage Life Insurance, you receive a lump sum designed to repay your mortgage if you die before you can pay off the loan.

Many people concerned about their loved ones’ finances in the event of their death take out Life Insurance to ensure their families can continue living in their home.

Mortgage Life Insurance is split into:

  • Level Term Mortgage Life Insurance
    The amount of cover stay fixed over time and is therefore often seen as well-suited for interest-only loans where the capital balance stays fixed over time
  • Decreasing Term Mortgage Life Insurance
    The benefit fall over time, thus making it better for covering capital/principal repayment mortgages because the benefit falls alongside the outstanding capital of the loan.

For those with dependent partners and children, Life Insurance can offer the peace of mind that comes with knowing they won’t struggle financially with housing costs should you sadly no longer be around.

What is the Risk of Dying During Your Mortgage?

Will Mortgage Life Insurance Pay Out?

Life Insurance has one of the highest pay out rates of all types of insurance. All of the UK’s leading insurers had a pay out rate above 95% in 2016.

The top two providers by payout rate had a successful claims rate of 99% or above.

The Association of British Insurers (ABI) publishes an average of the payout rate statistics from across all insurers annually. Its 2017 figures reveal that 98% of all Term Life Insurance claims were paid, which were worth £2.79 billion in total.

Often, for the fraction of claims that are not paid out, the reason is due to a lack of disclosure when the policyholder took out the policy (e.g. not mentioning a pre-existing condition). Outright fraud, such as faking death to claim a payment, also shows up in some of the denied claims data.

Need Help? Get Expert Mortgage Insurance Advice

We are here to walk you through your options and discuss if Mortgage Insurance cover is right for your needs and circumstances.

Why Speak to Us…

We started Drewberry because we were tired of being treated like a number and not getting the service we all deserve when it comes to things as important as protecting our health and our finances. Below are just a few reasons why it makes sense to let us help.

  • There is no fee for our service
  • We are independent and impartial
    Drewberry isn’t tied to any insurance company, so we can provide completely impartial advice to make sure you get the most appropriate policy based solely on your needs.
  • We’ve got bargaining power on our side
    This allows us to negotiate better premiums for you than you going direct yourself.
  • You’ll speak to a dedicated expert from start to finish
    You will speak to a named expert with a direct telephone and email. No more automated machines and no more being sent from pillar to post – you’ll have someone to speak to who knows you.
  • Benefit from our 5-star service
    We pride ourselves on providing a 5-star service, as can be seen from our 3821 and growing independent client reviews rating us at 4.92 / 5.
  • Gain the protection of regulated advice
    You are protected. Where we provide a regulated advice service we are responsible for the policy we set-up for you. Doing it yourself or going direct to an insurer won’t provide this protection, so you won’t benefit from these securities.
  • Claims support when you need it the most
    You have support should you need to make a claim. The most important thing when it comes to insurance is that claims are paid and quickly. We are here to support you during the claims process and make sure it’s as smooth and stress free as possible.
Tom Conner Director at Drewberry

If you want to discuss your mortgage insurance options with an independent expert, the team here at Drewberry is waiting for your call. We’ve helped many clients over the years and would be more than happy to offer the same service to you. All you need to do is give us a ring on 02084327333.

Tom Conner
Director at Drewberry

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If you are unhappy with our service, we have a complaints procedure, details of which are available upon request. If you are unhappy with how your complaint has been dealt with, you may be able to refer your complaint to the Financial Ombudsman Service (FOS). The FOS website is www.financial-ombudsman.org.uk.

Drewberry Ltd is registered in England and Wales. Companies House No. 06675912

Drewberry Ltd registered office: Telecom House, Preston Road, Brighton, England, BN1 6AF. Telephone 0208 432 7333

Drewberry Ltd (Financial Conduct Authority No. 505473) is an Appointed Representative of Quilter Wealth Limited and Quilter Mortgage Planning

Limited, which are authorised and regulated by the Financial Conduct Authority.

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