What is mortgage protection?
Mortgage Protection Insurance is designed to cover the cost of your remaining mortgage balance if the unexpected happens. Mortgage protection is usually a decreasing term policy because the amount of cover reduces in line with the balance of your mortgage as you make monthly payments.
In the event of the death of a policyholder, a cash lump sum is paid out equivalent to the mortgage balance to ensure your loved ones can live mortgage-free. Generally, payments are slightly cheaper than level term cover to reflect the reduced risk.
What are the different types of mortgage protection?
If you’re looking for insurance to cover you for health reasons, or you need longer-term protection, mortgage protection insurance might not be the best option. Here are some alternatives.
- Income protection
This is a long-term insurance policy that will provide you with regular income while you’re unable to work due to illness or injury.
- Life insurance
Will pay out if you die during the term of the policy. The amount depends on your level of cover and you can choose a lump sum or regular payments. You can even specify how the money needs to be spent – for example, on mortgage payments.
- Critical illness insurance
This type of insurance covers specific health conditions, such as a stroke, some types of cancer and heart attacks. You’ll receive one lump sum if you suffer from one of the critical illnesses covered.
How much does mortgage payment protection insurance cost?
Your mortgage payment protection insurance premiums will depend on a number of factors, including:
- The type of policy you take out
- The size of your mortgage repayments
- How quickly you want your policy to become active
How much will my policy pay out?
You can choose how much you want your policy to pay out every month – you may decide to build in a buffer over and above your mortgage repayments to cover bills and other expenses. However, providers usually set monthly upper limits of between £1,500 and £2,000.
Why might I need mortgage insurance?
Mortgage repayments are one of the largest bills people face, taking around 18% of combined household income each month, or 24% if you live in London. With that in mind, it's important to think about how you'd continue to pay your mortgage if you or your partner lost your source of income.
If it would be difficult, or if you're self-employed and therefore not eligible for sickness or redundancy pay, then mortgage protection insurance, also called mortgage payment protection insurance, might be for you.
Get a quote
If you're looking to get a quote on your Mortgage Protection policy don't hesitate to get in touch with one of our expert advisers today.