Choosing mortgage life cover to protect your home October 26, 2009
Posted by admin in : Buying Life Cover, Life Insurance Policies , trackbackPurchasing the first family home is a time when many people begin thinking about buying mortgage life cover to go along with it.
A mortgage is very often the most significant financial decision that any individual makes, and it’s always prudent to find a way of protecting it to ensure that your loved ones will not suffer financially from the loss of your income if you should die. A carefully-chosen life insurance policy is an ideal method of achieving this protection. So what are your options?
Level or decreasing term life cover?
The most common way of protecting your mortgage is to purchase term life insurance. Selecting life cover for mortgage protection requires making a choice between two different types of insurance—level term or decreasing term insurance. The choice is normally dictated by the type of mortgage you have, repayment, interest-only or a combination.
Level term life cover is most often used with an interest-only mortgage where the outstanding debt will stay the same, so the amount you are insured for remains constant over the life of the policy. A decreasing term policy is commonly used to protect a repayment mortgage as the size of the potential pay-out decreases as the mortgage is paid off. Regardless of which type you choose, the policy ends automatically if a claim is made, or when the full term is reached.
The cost of mortgage life cover
The cost of mortgage life cover depends on several factors. The most important being the amount you borrow, and the amount of time you’ll require to pay the mortgage in full. As will all types of life cover, the cost also depends on your lifestyle, age, and physical health. Lastly, the type of policy you choose, level or decreasing term insurance, also affects the cost.
In most cases, level term mortgage cover is more expensive than the decreasing term variety. This is because with decreasing term insurance, the size of the pay-out decreases over time, so the overall cost of premiums is reduced to reflect that. Because all other aspects of these two types of policies are more or less equal—in both cases, the mortgage is fully paid in the event of a claim being made—the type of insurance you get will typically depend on the type of mortgage and how much you can afford.
Level term cover does offer one advantage that decreasing term insurance does not. Because the size of the pay-out is constant over the life of the policy, your dependents will benefit from increased financial security if there is money left over after the mortgage has been paid.
Similar Posts:
- Do you really need Life and Critical Illness Insurance?
- What if you can’t afford to buy life insurance with critical illness protection included?
- Tips for buying flexible UK life cover
- What options to look for in your Term Life Insurance quote
- Do you need a life assurance or life insurance quotation?
Comments»
no comments yet - be the first?