When you purchase a property it is really important that you consider taking out protection cover. At Lonsdale Mortgages our qualified mortgage brokers will always discuss protection cover when we organise your mortgage.
If you already have a mortgage but don’t have protection cover please call us on 01727 845500 and we can review your circumstances and check if you require protection cover.
What mortgage protection cover should you choose?
Life Insurance cover
The only insurance you are required to get when you take out a mortgage is building insurance. You do not need to take out life insurance cover but most people take out life insurance cover if they have a partner or dependents who wouldn’t be able to pay the mortgage, as it ensures their family can continue to pay the mortgage and live in their own home in the event of the policyholder’s death. Otherwise your family may be forced to sell the family home and move out. Life insurance cover pays out a lump sum to your dependents in the event of your death within a chosen policy term.
Three different life insurance products exist.
Level term assurance - With this policy you agree a policy term and if you die within it a lump sum is paid out.
Decreasing term assurance - This insurance pays out a decreasing sum the longer the mortgage term continues. It is often used to pay off or a payment mortgage.
Family income benefit - If you die the income will pay out a monthly sum to your dependents for the length of your mortgage policy term.
‘We always offer protection cover when we organise a mortgage for a client. If we discuss a client’s circumstances and find out that life insurance is required, we need to agree how much cover is needed, as the more protection cover a client takes out the higher the monthly premium they will have to pay.’
Key considerations to work out how much life insurance cover you require:
How many dependents you have
What age are your dependents
How much income does your partner earn
How big is your mortgage
Do you get benefits from your employer
If you are unable to work income protection usually pays out a tax-free percentage of your salary on a monthly basis (which is normally 50%). This allows you to continue to pay bills and your mortgage payments. The income protection payments normally start if you have been unable to work for three or six months and generally continue until the policy ends or you return to work.
Critical illness cover
If you are diagnosed with a critical illness or disability, you can purchase critical illness cover that will pay out a lump-sum payment. This cover normally lasts until the mortgage is paid off or you come to retirement age. This can be purchased as a stand-alone policy or added to life insurance (as level or decreasing term assurance).
‘if you don’t have substantial savings that will always cover your mortgage payments you should consider taking out protection cover when you organise your mortgage. Protection cover will increase your monthly costs, however by putting life insurance cover in place it will give you peace of mind that your dependents will be able to pay your mortgage if you died. Similarly, if you organise critical illness cover and income protection your home would always be protected if you became ill and could not work. Our mortgage broking team offers mortgage advice and protection advice and we can review your protection requirements before offering different protection policies to suit your financial circumstances.’
Make sure you consider protection cover when you set up your mortgage. Your mortgage broker should always discuss this with you, but if you have a mortgage already and need protection advice call our qualified mortgage brokers on 01727 845500 or complete our booking consultation form.
As a mortgage is secured against your home or property, it could be repossessed if you do not keep up the mortgage repayments