Mortgage life insurance cover will pay off the outstanding mortgage if you die, which can be a great financial help for your loved ones.
Decreasing life insurance
Mortgage life insurance cover is also known as decreasing life insurance cover. The sum insured decreases over time, and the outstanding mortgage amount reduces as you make regular mortgage repayments. Decreasing life insurance reduces in line with the mortgage, so that no matter when you die, your dependents will be able to afford to repay the mortgage.
A non-decreasing mortgage has a fixed or level payment on death, but insurance premiums are more than decreasing life insurance. If you were to die several years after taking out the level life insurance cover, the amount paid out could be considerably greater than the outstanding mortgage. If you can afford the policy payments, a fixed life insurance policy may be better choice.
Before taking out a life insurance policy, ask your insurance broker to provide a quote for both mortgage life insurance and a fixed life insurance policy.
Why you may not need mortgage life insurance
If you are single with no dependants, then you probably do not need mortgage life insurance. If you have dependants and no mortgage, you may wish to consider other forms of life insurance.
If you have other financial commitments, such as credit card debts and loans, then you need life insurance that will pay off these items as well as the mortgage.
Why you need mortgage life insurance
If you have a mortgage and dependants, mortgage life insurance is a cost effective way to make sure that the mortgage is paid off if you die.
Some mortgage lenders will ask you to take out a mortgage life insurance policy at the same time as you obtain a mortgage.
You can combine mortgage life insurance with a critical illness policy that will cover the mortgage repayments if you are diagnosed with a critical illness that prevents you from working.
The cost of mortgage life insurance cover
How much a mortgage life insurance policy costs depends on a number of factors, including your age, if you smoke and if you have an existing medical condition. Generally, the cost will be lower than that of a fixed sum life insurance policy.
Though the sum insured decreases over time, monthly policy payments remain the same throughout the time that the policy is active.
If you remortgage your home in order to obtain a lower interest rate, this may affect your mortgage life insurance cover. If remortgaging increases the mortgage amount or extends the mortgage period, then the insurance company needs to be informed. They will adjust the conditions and cost of the mortgage life insurance.
If there are any changes to your mortgage, this could require a change to your mortgage life insurance too.
Buy mortgage life insurance from a broker
At Ascot Mortgages, we have access to a wide range of mortgage life insurance providers. We can find a competitive quote over the phone and explain all your life insurance options.