Things You Need to Know About Mortgage Life Insurance

Protecting your mortgage is one of the most popular reasons for taking out life insurance. For many families, the mortgage is the biggest monthly outgoing and if you were to pass away, your partner or children may struggle to meet that payment without your income.

Mortgage life insurance is designed to help your family pay off the mortgage if you were to pass away, removing the worry of meeting the monthly repayments. If you have not already taken out mortgage life insurance, here is some information to help you understand the type of cover and how it can help.

1. Mortgage life insurance pays off your mortgage if you pass away

Mortgage life insurance usually refers to decreasing term life insurance, but there are two types of cover you can get to protect your mortgage. Decreasing term life insurance is the most common as it is designed to pay out what is left on your repayment mortgage.

However, level term life insurance can also be used to pay off your mortgage. Level term pays off a fixed lump sum, and is most suited to pay off an interest-only mortgage.

Decreasing term life insurance is usually considered the most affordable type of life insurance. This is because your repayment mortgage debt reduces as you continue to pay it off, meaning the pay-out from your policy also reduces in line with your mortgage.

2. Covering both your mortgage and your family

There may be a chance that you do already have life insurance cover, but it is not specifically designed to cover your mortgage. If you have level term life insurance, your mortgage might already be covered.

This type of insurance will pay out a lump sum if you pass away. Depending on the amount, this sum could help your dependents with living costs but also pay off the mortgage. It is important to check what cover you already have to avoid paying twice for similar policies. 

You may wish to review your cover to make sure you have the right policies to protect both your mortgage and your family. This could be achieved through taking out two single policies, such as Family Protection and Mortgage Cover.

3. You do not have to buy it from your mortgage provider

There is usually no legal requirement to take out life insurance when you get a mortgage although this could be a stipulation from your lender. However, it is a good idea when you consider how it could help your family if the worst should happen. Your mortgage provider may recommend an insurance policy when you take out a mortgage, but you may not be obligated to take them up on it.

The cost of life insurance can vary greatly and so it may be helpful to have a look around before you commit to anything. At Caspian we will compare quotes from our panel of top providers for you.

4. Consider your family situation

Mortgage life insurance is ideal to prevent your family from struggling to pay the mortgage payments each month, and helps them to pay off the mortgage in order to keep the house. If you do not have any children and you are single, you might be wondering whether this type of insurance is worth it.

If you do not have anyone that you would like the house to go to in the event of your passing, then mortgage life insurance might not be the right policy for you.

However, mortgage life insurance can help to leave your partner with a mortgage-free property, which can mean this is an important type of cover even if you do not have children.

It is important to remember that if you do not have mortgage life insurance and were to pass away and therefore do not continue to pay your mortgage, you will default and the lender who has a charge on the house will repossess it.

5. Two single policies or joint cover

There are many considerations when taking out life insurance. If both you and your partner are looking for cover, you have the choice of buying single policies or a joint policy. If you are not sure which one is best for you, it is important to understand the pros and cons of each.

A joint policy is generally cheaper than two single policies. However, a joint policy will only pay out once, usually on the passing of the first policyholder.

On the other hand, two single policies will pay out for both deaths but it could be more expensive. However, if you do not have any dependents, there may be no need for the second pay-out.

The policy type you choose is dependent upon your personal circumstances and lifestyle. Your mortgage only needs to be paid off once, therefore a joint policy is usually recommended to cover a mortgage.

6. You do not have to do the hard work

At Caspian Insurance, we can help you make an informed decision about your life insurance cover. We work with some of the leading insurance providers to bring you a suitable policy at an affordable price.

Our team of advisors are on hand to understand your individual circumstances and search our panel of insurers to find suitable cover for your needs. Whether you are new to life insurance or you already understand what you need, we can offer advice in line with your best interests.

To find out more information or to get a quote, get in touch with us today!

Please note the above does not constitute as financial advice and may change depending on individual circumstances.