Mortgage Protection Insurance 

Some Guidance


How does mortgage protection work?

Mortgage protection insurance aimed at protecting the asset you have a loan on – your home. So, if you were to pass away before you finished paying off your mortgage and during the policy term, your loved ones would be able to continue living in the home, because the insurance would help pay off the rest of the loan. 

With this sort of policy, you pay the same premiums for the policy term, and the value of your policy gradually decreases until it reaches £0 once the policy expires – and decreases in line with your mortgage (or other repayment loan). This is decreasing cover, as opposed to level or increasing cover, is that the value of the policy is enough to repay the loan, and the premium is usually lower than for other types of cover. 

Do I need mortgage protection?

If you have a mortgage, it's a good idea to have some type of life insurance in place to protect the exposure to debt. What type of life insurance is right for you depends on your personal circumstances. Take time to consider how much your loved ones might need to cover mortgage repayments if you were to pass away.

Studies reveal that just 58% of mortgage owners have life insurance. Even fewer have critical illness Insurance (28%) or income protection (12%), which provide financial support if you are diagnosed with an  Critical illness that's covered by the policy, or if you're unable to work 2. Many people believe they can't afford life insurance, but it's possible to get life insurance from just £5 a month, which is real food for thought.

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Mortgage protection insurance is a type of term life insurance. It is a decreasing insurance used to protect the mortgage exposure.   Usually, over time, your mortgage decreases. If you have a smaller mortgage, you need less cover – so mortgage protection cover also decreases over time. That's why it's also known as decreasing life cover.