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Mortgage Payment Protection and Insurances
Mortgage payment protection and insurances are available from insurers to cover all aspects of mortgage protection and insurance. Mortgage payment
protection and insurances can cover accident, sickness, unemployment, life/death, critical illness, redundancy or loss of income.
Life assurance
Life assurance mortgage protection pays a lump sum on death of the person insurer. It is important especially to protect children or a partner that would not be able
to afford to live in your home without you. There are two types of life assurance, level term assurance and decreasing term assurance.
Level term assurance mortgage protection is often used to cover an interest only mortgage. You can choose the level of cover (e.g. £100k) and the term that it should cover
you for (e.g. 25 years - often the same term as your mortgage).
Decreasing term assurance mortgage protection is often used to cover capital repayment mortgages. Once again you can choose the level of cover and the term, and often you
will choose to have it cover the mortgage balance at the outset of the mortgage and the term to be the equivalent of the mortgage term. As the level of
cover reduces in line with your mortgage, it is usually cheaper than level term assurance.
Income protection
Income protection insurance pays a regular amount to you, usually monthly. The amount payable is determined at the outset of your insurance application and you
can have it cover you for as much as you like (the bigger the cover, the more expensive the premium).
Many people have income mortgage protection to cover their mortgage as well as some or all of their regular bills, costs that don't stop just becuase you are not working.
Claims will pay out after a pre-set deferment period (e.g. 4 weeks after you are made unemployed) and will last for a set amount of time.
Critical illness cover
Critical illness cover insurance pays a lump sum to you when you are diagnosed with having a specific illness. Different insurers will apply different criteria and
will pay out for different illnesses.
Advice
You will need to seek advice from a financial adviser before applying for certain insurances. When you apply for your mortgage you will be advised whether
you need to be referred for mortgage payment protection and insurance advice.
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