Mortgage Protection
The average mortgage in the UK is over £100,000, which is
usually paid back over a long period of time, up to 25 years. Even
with the longest terms, the monthly repayment will be in the hundreds,
possibly in the thousands of pounds.
Mortgages are secured on your home meaning that your house will
need to be valued. The mortgage repayments come out of the income
of the applicants for the mortgage. So if, for any reason, you
can't afford the repayments, your home will be at risk.
Mortgage Payment Protection insurance provides you with cover,
should anything happen (such as losing your job) which would cause
you to be unable to keep up repayments.
Should the person paying the monthly repayments die, there may
be no way for the bereaved to keep up the mortgage payments on
the house. A potentially disastrous situation that could arise
here is that your dependents could lose your home. You need to
take out a life insurance policy to cover this situation.
The nature of a repayment mortgage is that you take it out for
a certain amount that you repay over a certain term. Should everything
go right, after that term is up, you will have paid off your mortgage.
As the term progresses, the amount you owe decreases.
A term insurance policy is quite similar, in that you are covered
for a certain amount over a certain period of time, with the difference
being that the insurer will pay out should an event occur. This
event would be your death in the case of term insurance.
Say you take out a mortgage of £200,000, you would need £200,000
of cover with your policy. Once you pay the monthly payments, at
the end of a year you may have £195,000 left (with most of
your monthly payments going towards interest in the first year).
So, at the start of the second year, you would only need £195,000
of cover. After each premium is paid, you would need a decreasing
amount of cover, which is why mortgage protection is also called
decreasing term insurance.
The amount assured in a mortgage protection policy reduces by
an agreed amount, which is usually equal, over the course of the
term. The sum will only be paid out should the person whose life
is insured, die during the course of the term. There is no surrender
value and premiums will be lower than for level term insurance,
due to the decreasing sum assured.
You should bear in mind that the fixed term means you have no
flexibility, and you can't extend the cover.
If you are seriously looking for mortgage protection and would
like more information on how it works, we recommend you visit UK
Mortgage Protection.
For a great deal on a UK
mortgage,
visit UK Mortgages & Loans.
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