OK, so it may not seem like a gentle introduction to your working week, but Mondays represent the start of a fresh seven days, with new ideas and goals, so why not take this opportunity to have a think about your mortgage insurance situation?
After all, the mortgage is usually the largest debt that a household has. If the main income earner loses their income, mortgage repayments remain due, and difficulty paying them puts the home at risk.
There are four main types of insurance that can help pay the mortgage if the main wage earner cannot work: life insurance, income protection, mortgage insurance and critical illness insurance.
Mortgage protection insurance
Mortgage protection insurance is designed to cover your monthly mortgage repayments if you are sick or injured and cannot work. Some policies will also cover redundancy.
These policies pay out for a limited time, usually 12 months. Most injuries and illness last less than 12 months, so mortgage protection will cover these situations.
There will be a delay of between 30 and 60 days before payments start, so it helps to have savings available to cover this period. Once payments start, they will be backdated from the date when you claimed.
Life insurance pays a lump sum if you die within the period of the policy, A policy can be of a set period of time and pays out if you die within that period, but your dependants receive nothing if you die outside of the period. Whole life insurance, as the name implies, covers you for your entire life and is guaranteed to pay out at whatever age you die.
Whole life insurance costs the most. If your main concern is paying off the mortgage, then you can take out a policy that lasts until the date when the mortgage is paid off. You can save further on premiums by selecting a policy whose payout decreases over time. This can reflect the declining outstanding balance of your mortgages as it is gradually paid off.
Income protection insurance
Income protection insurance pays a percentage of your salary if you are ill through illness or an accident. It pays a fixed percentage of your salary as a regular tax free sum, and payments continue until you can return to work.
There are normally no limits to the number of times that you claim. The way that you spend the money is not restricted; it can be used to pay the mortgage and other household bills.
Critical illness cover
Some illnesses regarded as critical can result in long-term unemployment. A critical illness policy pays a fixed sum when you’re diagnosed with a serious illness. Policies vary on which illnesses are covered, but conditions like cancer, blindness, and Parkinson’s disease are usually included.
Which one should you buy?
In an ideal world, you would buy all of the insurance products that can protect your mortgage, but that’s obviously an expensive option. As a minimum, it’s important to purchase life insurance. After that, choose one or more of mortgage protection, income protection and critical illness products.
For further advice on protecting your mortgage, talk to a friendly adviser here at Ascot Mortgages. We can find the right insurance products to suit your individual circumstances.