At Lonsdale Mortgages when we provide you with mortgage advice, we will always recommend that when you take out a mortgage you review your mortgage protection cover in case you were unable to pay your mortgage.
In this article we will review the three main types of mortgage protection – Life assurance, critical illness cover, and income protection. Each insurance cover offers a different type of protection, but they all work to insure you when you need it.
What is Life insurance and why should you consider it when you purchase a property?
If you are the sole earner or your partner relies on your income to pay the mortgage it is worth thinking about purchasing life insurance cover so your dependants can pay or clear the mortgage if you die. Sometimes people also take out life assurance cover when their partner is doing a job that would still need to be done if they weren’t there, for example looking after children. Purchasing life cover reassures you that your dependents will be looked after financially in the event of your death. There are three different types of life cover including: level term assurance, decreasing term assurance and family income benefit.
Who should take out Critical Illness cover?
If you are diagnosed with a critical illness or disability any critical illness cover will pay out a lump sum to enable you to keep paying your mortgage. You can take out a policy that will cover a certain period, for example until your mortgage is paid off or you retire. It can be purchased as a policy on its own or with life assurance. You can purchase critical illness cover to protect you if you were diagnosed with a variety of illnesses including stroke, a heart attack, cancer.
How can Income Protection pay your mortgage if you are unable to work?
If you take out income protection and you are unable to work because of disability or illness you will be paid a percentage of your salary, often up to 50%. This helps you pay your mortgage and cover other household bills. Payments normally finish when you return to work or until the end of the policy term or retirement age if you are unable to return to work.
‘Whenever I offer a client mortgage advice and produce a mortgage quote I always ask if they have protection cover, as I think it is important that anyone taking out a mortgage considers how they would pay for their mortgage if anything unforeseen happened to them. It is not easy to discuss life assurance with clients but I believe it is my role as a mortgage broker to offer protection advice so I will check that if a dependent died their family could still pay their mortgage. If this isn’t the case, I would always recommend that they review their life insurance cover when they take out their mortgage. Some employers offer critical illness and life cover for their staff, so I would suggest that clients check first to see if they are covered before taking out new policies. I also recommend that my clients regularly review their insurance policies. As their circumstances change, their children grow older or they pay off part of their mortgage they may need different policies or could consider renewing their insurance at a lower amount. At Lonsdale Mortgages we now send out protection cover cost examples when clients take out a mortgage so they can see how much it would cost them to take out protection insurance. If you have a mortgage but no life cover, critical illness cover, or income protection cover please call our mortgage broking team on 01727 845500 for specialist mortgage and protection advice. We can review the different protection policies to find you the most suitable product for your requirements.
You don’t need to have taken out a mortgage policy through Lonsdale Mortgages to get protection advice, but we recommend that you check now to make sure you and your family are adequately covered.
As a mortgage is secured against your home, it may be repossessed if you do not keep up the mortgage repayments.