Mortgage protection - life insurance

Anyone with a mortgage has probably wondered at one time or another; what would happen to their family home if they were to die before the mortgage was paid off. Mortgage protection insurance can help give the peace of mind that your family would not have to cope with mortgage debt in the event of your death.

Decreasing term mortgage insurance

One way of protecting your mortgage is with a decreasing term mortgage protection policy. Policies of this kind are aimed principally at homeowners with repayment type mortgages.

These are mortgages where you are repaying the capital and the interest over the entire life of the mortgage. The amount you owe to your lender decreases with each payment you make.

The amount that a decreasing term mortgage policy will pay out in the event of your death similarly decreases over time in line with your mortgage debt.

Decreasing term policies have therefore no investment potential. They only cover the outstanding mortgage debt. They do not pay out a lump sum at the end of their term.

They are therefore typically cheaper than other policies, which may also provide a lump sum.

Mortgage term insurance

With a mortgage term insurance policy, the amount to be paid out in the event of your death is fixed at the start of the policy and does not decrease over time. So, the money can be used to pay off the mortgage and there may be a lump sum left over.

Premiums for this type of mortgage insurance may be higher than those for decreasing term cover.

Premium levels

The monthly premiums for mortgage insurance will depend on a number of factors including the amount and length of your mortgage, your age and general health.

Paying a bit more to increase mortgage protection cover to include terminal or critical illness may also be possible.