Mortgage insurance may mean different things to different people – some people may see it as a life insurance policy that clears any outstanding mortgage debt in the event of your death, while others may think that is relates to protecting your mortgage repayments in the event that you lose your income.
The following article is a brief explanation of mortgage life insurance. Using the expertise of specialist insurance providers, such as Drewberry Life Insurance, will help you decide further what you may need in terms of mortgage protection in order to protect the interests of your family.
In the event of the untimely death of a significant income provider for your family, if the surviving family members are unable to maintain payments on a mortgage then the roof above their heads might be put at risk.
Families who find themselves in such unfortunate circumstances may initially receive a very substantial degree of sympathy from mortgage providers, however, that might be unlikely to translate into a long-term agreement to do anything significant about mortgage repayments.
Perhaps rather faster than you might imagine, mortgage providers might start to ask demanding questions about repayments and then move to repossession.
It might also not be wise to count too heavily on government help. Such aid might be extremely limited and only available in circumstances where, for example, the majority of any existing savings had already been used up.
Mortgage life cover exists to try and prevent such situations arising.
How mortgage cover works
This can operate on an extremely simple basis.
- You select a policy that will, in the event of the death of the insured party, pay out a lump sum to the family concerned.
- The sum may be used to continue to meet mortgage repayments, to pay off the mortgage entirely or for any other purpose.
- How much cover you choose and pay for is something that is up to you and your family.
Types of cover available
Some policies are described as level term. That means that the sum paid out would be identical should you die in first year of the term, as it would be if you died in the twentieth year.
A typically more cost-attractive option might be offered by what are called decreasing term policies. Here, the sum payable in the event of a successful claim decreases each year in line with your reducing mortgage debt. That means the policy would pay out an amount sufficient to clear off the mortgage debt but which may be considerably lower in your twentieth year of the term than it would have been in year one.
Will it ever happen to you?
Most people would dread the idea of a premature death for many reasons, not the least of which is likely to be the financial effects it may have on the families left behind.
This type of cover might ensure that your family home would be protected in such a situation and that in itself might be a justification to avoid any casual dismissal of this type of policy as being an unnecessary luxury.
Is this the right coverage for you?