Is Mortgage Protection Insurance Mandatory?
There is a common misconception amongst first-time buyers of a mortgage that some form of financial protection is compulsory. This is not the case, however, and taking out a mortgage without insurance is absolutely fine.
However, there are a lot of benefits to Mortgage Protection Insurance that could save you and your loved ones from losing your home if the worst were to one day happen.
Would your loved ones cope financially?
It is important to ask yourself what you would do if you were too ill to work or worst case passed away? Would your loved ones cope financially? Would they be able to cover the mortgage and any other financial obligations such as council tax, utilities and other general living costs?
Do I Need Mortgage Insurance?
A mortgage can take a lifetime to pay off and missing your mortgage payments can have severe consequences, resulting in increased interest rates, additional fines, or even losing your home altogether.
For these reasons, Mortgage Protection Insurance can be a valuable safety net to prevent the worst from happening.
- Accidents / Injuries – In 2015/16, 621,000 UK citizens sustained injuries at work, 152,000 of which led to an absence of more than 7 days.
- Sickness / Illness – Nearly 357,000 people in the UK are diagnosed with cancer every year.
- Unemployment – In 2016, 114,000 UK workers were made redundant and at the peak of the 2009 recession, 235,000 were made redundant.
- Death – One of the UK’s leading causes of death is Ischaemic heart diseases. In 2015, Coronary Heart Disease killed 69,545 people in the UK.
While some people may be capable of using their savings to keep up with their mortgage payments, that may not be a viable option for everyone.
- May 2017, the UK owed £1.34 trillion in outstanding mortgages.
- An estimated 14 properties are being repossessed every day as of July 2017.
- The average outstanding mortgage debt for UK households in 2017 has been estimated as £120,512 with average yearly interest of £3,109.
- 1 out of 4 Brits still has at least £100,000 of their mortgage left to repay.
The main question isn’t always whether or not your savings will cover your mortgage payments. For some people, the question might be how long their savings will last.
Mortgage Protection Insurance will cover your mortgage either by helping you meet your monthly payments or by clearing your debt with a lump sum.
For many people, it provides them with peace of mind and is there to provide them with some much needed financial support when they fall on hard times.
Independent Protection Expert at Drewberry
Sam was knowledgeable and attentive and spent a long time explaining and working out what Income Protection insurance would be best for me.
What are the Different Types of Mortgage Protection?
There are two different types of Mortgage Protection Insurance that will protect your home and loved ones if the worst were to happen.
Mortgage Life Insurance
Mortgage Life Insurance is designed to take care of your mortgage and provide financial support for your loved ones if you were to pass away.
Upon your death, your loved ones would be able to claim a lump sum equivalent to or more than the cost of your mortgage. This is then used to pay off your remaining mortgage debt and ensure that your loved ones can afford to stay in their home.
Step 1: Purchase Mortgage Life Insurance policy for the value of your mortgage debt
Step 2: You tragically pass away
Step 3: Your loved ones present a death certificate to the insurer and make a claim
Step 4: The insurer gives them a lump sum of equal if not greater value than your mortgage.
Step 5: Your loved ones use the insurance payout to pay off the remaining mortgage debt.
Step 6: Any of the payout that is left over can be used to cover other expenses, such as funeral costs or general monthly expenditure.
What is Mortgage Payment Protection Insurance?
Mortgage Payment Protection is designed to protect your monthly mortgage payments. If you become to ill to work or injure yourself, you can claim on your policy and begin receiving monthly benefits.
These benefits will cover the cost of your monthly mortgage payments and, depending on your policy, give you a little bit to spare to help you afford other expenses while you are out of work.
Step 1: You take out a policy that insurers you for the value of your monthly mortgage payments.
Step 2: You fall ill or are injured and become unable to work or earn income
Step 3: You provide the necessary paperwork to make a claim with your insurer including evidence you are unable to work.
Step 4: After your deferred/ excess period, your insurer begins paying monthly benefits to cover your mortgage payments with possibly extra benefits to cover other necessary expenses.
Step 5: You can continue claiming until you are well enough to return to work or until you reach the end of your claim period.
How Much Does Mortgage Insurance Cost?
The cost of Mortgage Insurance is impossible to say for sure due to the vast options that are available. Your unique circumstances and the insurer you choose for your policy will also have an impact on the cost of your Mortgage Protection as well as the type of policy you need.
The most important factor in the cost of your policy is the cost of your mortgage. This is because the level of cover you need is determined by the cost of your mortgage payments or the total value of your mortgage debt.
You can adjust the cost of your policy by increasing or decreasing your cover, however this can put you at risk of your payout falling short of covering your mortgage completely.
Independent Protection Expert at Drewberry
To ensure you take out the appropriate cover at the most competitive rate it is worth speaking to one of our mortgage insurance experts. They will be able to advise you on the type of cover you require based on your current risks and research the whole of the UK market to find you the best deal. Don’t hesitate to pop us a call on ☎️ 02084327333.
What is the Best Mortgage Insurance?
Everyone has different needs when it comes to their Mortgage Protection and one policy is not going to be the best option for everyone.
Your unique circumstances will affect the type of insurance you need, the optional add-ons you choose and the insurer you choose for your policy.
One of the main reasons why you might consider asking a financial adviser for Mortgage Insurance advice is because there are so many options to choose from for each policy.
You can adjust different aspects of your policy to change the cost and the level of cover of your mortgage insurance, but one size does not fit all. Another person’s policy preferences may not be right for your circumstances, which is why you need to look carefully at the choices that are available.
How Do I Find the Best Mortgage Payment Protection?
- The Payout Period Length
This is the length of time for which you can claim your monthly insurance benefits. Most MPPI policies have a maximum payout period of 12 months. However, some insurers will pay out for as long as two years.
- The Excess Period Length
The opposite of your payout period is your excess period. The is the the length of time you have to wait after leaving work before you will be able to claim on your Mortgage Insurance. The longer you set your excess period, the less you might have to pay on premiums.
- Accident & Sickness, Unemployment, or All Three?
You can get different MPPI policies that cover different risks should you be out of work. You can choose to be covered for only Accident & Sickness Insurance, only Unemployment Insurance, or you can choose to be covered for all three.
How Do I Find the Best Mortgage Life Insurance?
- Decreasing or Level Term Life Insurance
There are two different types of Mortgage Life Insurance cover that you need to know about: Level Term Life Insurance and Decreasing Term Life Insurance. These two different types of policies were designed to be appropriate for certain types of mortgages although they both also differ in cost and the levels of cover they offer.
- Level of Cover
Typically, the level of cover you choose would be enough to cover your mortgage, however there are benefits to increasing or decreasing your cover.
- Added Critical Illness Cover
One of the most common add-ons for mortgage insurance is Mortgage Life Insurance with Critical Illness Cover. This policy will allow you or your loved ones to claim in the event of death or diagnosis of a critical illness.
How Do I Find the Best Insurer?
Finding the best Mortgage Insurance provider is not an easy task. At Drewberry, we can help you find the best insurer for your policy as part of our Mortgage Insurance advice service.
As Independent Financial Advisers, we have access to the entire UK market.
We can help you find and compare quotes from the UK’s top Mortgage Insurance providers.
We can also recommend to you the most promising insurers and best policies with no obligation to buy.
Use our Mortgage Insurance Calculator to compare quotes from the UK’s top insurers and get started on your search for the best Mortgage Protection Insurance.
If you’re in search for the best Mortgage Protection Insurance, a great place to start would be with our guide to the Best Mortgage Insurance.
After that, feel free to contact our financial advisers to receive expert Mortgage Insurance advice and a helping hand to find the best policy for you and your home.
Independent Protection Expert at Drewberry
Insurer Claims Statistics
When choosing our personal protection we want to know it is going to pay out when we need it to.
By choosing a product or specific insurer from the menu below you will be able to view the claims payout rates for all of the main UK insurers for income protection, life insurance and critical illness insurance.
Common Mortgage Protection Questions
Is Mortgage PPI the Same as Income Protection?
While Mortgage Payment Protection insures your mortgage payments, Income Protection insures your income.
Typical cover for Mortgage PPI would cover the cost of your monthly mortgage payments while cover for Income Protection can cover as much as 75% of your typical monthly earnings.
Is Income Protection better than MPPI?
If you want to make sure that you have a means of meeting your mortgage payments if you take time off of work, the better option would most likely be Income Protection.
This is because Income Protection uses an Own Occupation definition of incapacity rather than Suited Occupation, which is what most PPI policies tend to use.
With Income Protection, your claim will be accepted as long as you are unable to perform your duties in your current occupation. Most PPI policies, however, won’t allow you to claim if they think that you are still capable of performing at a job that is suited to your skill set or qualifications.
Should I Have My Mortgage Life Insurance Written in Trust?
We usually advise that you have your Life Insurance policies written in trust as a precaution. By writing your Mortgage Life Insurance policy into trust, you can avoid having your payout affected by inheritance tax.
Writing your policy in trust will also ensure that your loved ones receive the payout of your policy as soon as they need it.
Without being written in trust, your insurance payout will have to go through probate before it can be given to your beneficiaries, which can take as long as 6 months.
Should I Get Joint Mortgage Protection Insurance?
Joint Mortgage Insurance can save you and your partner money if you want to insure both of you, however it does come with its issues.
Joint Life, first death policies will only pay out once when the first partner dies, leaving the surviving partner without any Life Insurance cover after the mortgage has been paid off.
With Joint Mortgage PPI, each partner will only be insured for 50% of the mortgage. It is possible to adjust this if one partner is paying more for the mortgage, but you will need to take out a separate policy if you want to be insured for the full value of your mortgage.
Should I Add Critical Illness Cover to My Mortgage Life Insurance?
While Critical Illness Cover is a valuable type of protection, it doesn’t offer a great amount of protection if you fall ill or injure yourself in a way that is not recognised by your insurer.
Many insurers manage their own list of critical illnesses which means that there is no guaranteed that any condition will be classified as a critical illness.
In addition, Mortgage Life Insurance with Critical Illness policies will only pay out once for either critical illness or death. So, if you claim for a critical illness with this policy, you will lose your Life Insurance cover and the policy will terminate.
Which Type of Life Insurance is Right for my Mortgage?
Level Term Mortgage Life Insurance is designed to protect a capital/ repayment mortgage.
With a Level Term policy, the payout of your Life Insurance policy will always stay at the same value. No matter when you or your loved ones claim on your policy, the payout will always cover your mortgage.
Decreasing Term Mortgage Life Insurance is designed to protect interest only mortgages.
As you regularly pay off portions of your mortgage debt, the payout you are entitled to decreases. This is in order to cover your remaining debt without forcing you to pay for excess cover that you don’t need.
Get Mortgage Insurance Advice
There is a lot that you need to decide on when you purchase mortgage protection insurance and the right decision is not always clear. That’s why, if you are interested in protecting your mortgage payments, you should consider turning to Drewberry financial advisers for Mortgage Insurance advice.
Our expert financial advisers are here to help you the best policies and insurers to protect your home.
Call us today on ☎️ 01273646484 to find out more about your Mortgage Insurance options.
We offer free and impartial advice to help you protect your finances and your important financial commitments.
Independent protection Expert at Drewberry