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Mortgage Protection

mortgage protection
Mortgage Protection Insurance

Mortgage protection insurance covers a mortgage in the event of death. It runs for the same length of time as your mortgage. So , if you take out a mortgage over 35 years, your mortgage protection insurance must also be in place for 35 years.You can however, switch  insurance providers at any stage of your mortgage term.

This type of insurance does not cover your repayments if you cannot work because you are made redundant, or cannot work because of illness or disability. In this instance, you would need ‘mortgage repayment benefit’.

How much does it cost ?

The premium you pay each month for a mortgage protection policy depends on the size of your mortgage, your age, gender, the state of your health and whether you smoke.The premium is fixed for the term of the mortgage.

Do you have to take out a mortgage protecion policy ?

Your mortgage lender will normally require that you have mortgage protection insurance to pay off the loan if you die.The main reason being to make sure that the family home would not have to be sold to pay off the mortgage.

While your lender can insist you get mortgage protection insurance, they cannot insist that that you buy it from them.You are free to shop around to buy it.

Types of Mortgage Protection ?

Generally , as the amount you owe on your mortgage goes down, your mortgage protection cover will also go down.It is the most common and cheapest form of life cover.

You can also buy  a more expensive type of mortgage protection policy, known as a ‘level-term policy’.This gives you the same amount of life cover throughout the term of your mortgage.It is usually used for an ‘interest-only mortgage’ , where the original mortgage amount is still owed until the end of the mortgage term.

You can also use a level-term policy with your normal reducing mortgage.This means that you will have more life cover than is needed to clear your mortgage at any point in time. The extra life cover would be paid to your dependants if you die.

What happens if you change your mortgage ?

If you top up your mortgage or extend your term of your mortgage , you will usually have to get a new mortgage protection policy.Your new premium is likely to be higher as you want more cover over a longer term and because you are older than the last time you took out cover.

Why choose First Step as your insurance broker ?

First Step Financial Planning will  provide you with  independant financial advice and  find you the best mortage protection policy to suit your needs. We also give advice on choosing the most suitable protection policies.