Mortgage Life Insurance
If you’ve got a mortgage it’s more than likely you would have encountered mortgage life insurance at some point in the past, either pre or post completion. It’s a robust insurance plan designed to clear the balance of your mortgage should you pass away during the term.
Most couples take out a mortgage on a joint basis, meaning their combined income is used as the basis on which the monthly mortgage payments will be maintained. If the worst happened and one of the two was to pass away, the surviving mortgage holder would more than likely struggle to keep up with the payments once they’d used up any savings that may have been in place as a contingency.
So, we know that mortgage life insurance, or decreasing term life insurance as some call it, can be a valuable yet affordable protection option. But let’s look at the variations and quirks of mortgage protection in a bit more detail to help you understand your options.
Switching providers could save you money.
If you’ve got what might be seen as an “old” policy that you took out over 5 years ago then you could quite possibly reduce your monthly mortgage life insurance premiums by simply reviewing it online. Mortgage life insurance premiums have reduced considerably in recent years and many of our customers find they can save on their monthly premiums without compromising their existing level of cover.
If you don’t have dependents you may not need it.
If you are single with no children, it might be worth considering whether or not you need mortgage life insurance. If you were to pass away, would you want to clear the balance and leave the property to anyone? If the answer is no, you might be better off investigating income protection insurance, which could be a valuable policy for those on a single income with monthly mortgage commitments.
Look at taking a combination of plan types.
Mortgage life insurance is often referred to as decreasing term life insurance. This means the benefit amount reduces in line with your mortgage balance. If the worst happened and you passed away, the mortgage would obviously be cleared by your decreasing term policy. However, it’s worth giving consideration to whether or not your surviving family would need an additional lump sum to allow them to keep their head above water financially. One option is to take a level term policy with a fixed lump sum benefit which could run alongside a decreasing term mortgage life insurance policy, giving you a robust protection option which would ensure peace of mind for both you and your family.
Pay attention to the type of premium you’re choosing.
When reviewing your mortgage life insurance policy it’s prudent to ensure you are presented with “guaranteed” monthly premiums. This type of premium means your mortgage life insurance costs will not increase during the policy term, so if you take out a policy for £25 per month, that’s the price you will pay each month until the policy comes to and end and the mortgage is cleared. Beware of brokers and websites offering “reviewable” premiums, as these could be subject to increase, meaning your mortgage life insurance premiums will become more costly over time.
Review your cover if you stop smoking.
More and more people have been quitting smoking since the smoking ban in 2007. If you fall into this bracket and have quit smoking since taking out your mortgage life insurance then it’s definitely worth running a quick comparison. Logic and statistics tell us that smokers are more at risk of death than non-smokers and as such, non-smoker mortgage life insurance premiums are often 50% cheaper than those paid by smokers.
Source: The Protection People