Mortgage Protection Insurance is a term used to encompass various types of cover designed to protect borrowers from events that could severely impact their ability to maintain mortgage payments.
There are different variations but when connected to a mortgage they are all there to provide peace of mind and usually fall into the following categories:
As a rule, if the policyholder dies within the term, then the sum assured should be enough to pay off the outstanding mortgage balance and ensure the borrower’s dependents aren’t left with a debt they might not otherwise be able to manage.
Our Mortgage Advisors in Leicester can run through all the different types of life cover and recommend the most suitable plan for you.
Critical Illness Insurance works in a similar way to Life Assurance, in that it is usually taken for a specific term of years and can have different options such as level/increasing etc.
It is designed to pay out a lump sum and, like Life cover, for borrowers, it is typically taken on a decreasing term basis in line with the reduction of your mortgage balance.
The key is that the benefit is paid if you fall victim to one of a number of specified critical illnesses and pays out whatever the long-term prognosis of that illness.
The type of illnesses covered vary from company to company, that’s why this type of insurance cannot be solely price-driven and advice is recommended.
In practice, many companies will offer Life and Critical Illness Critical cover as a combined policy and would usually payout on the “first event” i.e. whatever happens first | either death or a serious illness | the pay-out is made. They can also be written on a single or joint life basis.
Whereas Life and Critical Illness cover pay out a lump sum, Income Protection pays out a monthly sum designed to replace your wages in the event of you being unfit to work. Unlike Critical Illness cover, there are no restrictions on the illnesses or injuries covered, the only factor being whether they make you unfit to work. There are however restrictions on how much you can cover and how quickly benefits would start to be paid.
Like Life and Critical Illness cover, these policies are underwritten based on your health and lifestyle at the time you apply. All income protection policies are written on a single life basis.
There’s an adage that says you can never have too much insurance. Certainly, many people have one or more of the different types of policy and it would be wrong to think of Mortgage Protection Insurance as just an “either/or” choice.
However, in the real world, affordability plays a massive part, so whilst it would be fantastic to cover yourself for every potential opportunity, our Mortgage Advisors in Leicester will help you and tailor the type of cover to be the most suitable combination to your family’s priority and budget.