What exactly is mortgage protection and why do you need it? Mortgage Protection Insurance is a form of life assurance cover. In the event of your (or your spouse’s) death, this insurance will clear your mortgage. If you are applying for a mortgage with a bank, the bank will insist that you take out mortgage protection insurance. It’s a necessary evil, but often is an unexpected expense when you’re already stretching funds to meet the cost of a new house and the mortgage associated with it.
Mortgage protection insurance serves two purposes. Firstly, it relieves your immediate family members of mortgage payment obligations and ensures that no unexpected financial burdens are passed on in the unfortunate event that you pass on before you have paid it off. It is especially helpful in circumstances where you are the main breadwinner in the house and if your dependents may find themselves in a pickle if they can’t continue mortgage payments without your income.
Secondly, mortgage protection insurance covers you in the event that you are unable to work for an extended period of time due to illness or injury. Mortgage protection insurance can help you pay your home loan installments, allowing you to focus your efforts on recovery without worrying about meeting your financial obligations.
The policy does not need to be with your bank
If your bank is arranging your mortgage, they have a right to insist that you have mortgage protection cover. But even if this is one of the conditions of your loan, they can’t force you to take the policy out with them. Once you get the correct amount of cover for your mortgage, then you are allowed to take out any mortgage protection policy on the market. Your bank normally deals with a single life assurance company whereas a financial broker will provide you with a range of quotes so you can get the best / most reasonable policy to suit your needs. Your bank then, must accept this policy.
The amount of cover does not have to decrease in line with the mortgage
Life assurance cover provides enough to clear your loan at any point during the term of the mortgage and it is the minimum amount of cover that you must have in place. But, if you choose to have more cover, for instance the original mortgage amount, your financial broker can advise you on what plan to suit you. Then, the excess cover would be paid to your estate in the event of your death, so it could cover other expenses even if your mortgage has already been paid off.
Check that a policy pays in advance and not arrears
Should the worst happen, the last thing you want is to play a waiting game when the funds are required. Although there is generally a built-in waiting period, any longer can create serious financial pressure on family members so talk to your broker about a plan that pays in advance.
One of the benefits of taking out mortgage protection insurance through your broker is that it can fit into your overall financial plans and your broker will let you know about features that may not be available from your bank. Ease Insurance Brokers will provide you with a range of options available for your mortgage protection insurance.