What Insurance Policies Should You Consider for Your Mortgage?

What Insurance Policies Should You Consider for Your Mortgage?

A successful mortgage application is great news for first time buyers, and it takes you one step nearer to home ownership. It’s probably going to be the biggest purchase you ever make, and this is why it’s worth considering making your new home more secure with an insurance policy. Here’s a look at the different types, and what might be right for you.

Mortgage life insurance covers your outstanding mortgage payments, in the event of your passing away before the mortgage is paid off. If you are the main earner in the household, and have loved ones who are financially dependent on you, then you may want to consider taking out life insurance on your mortgage.

It’s not mandatory to take out life insurance if you want to get a mortgage. However, it provides you and your family with the peace of mind that they won’t be responsible for paying off the rest of the mortgage if you die, and it mitigates against the risk that the family home will be repossessed.

There are two policy options: decreasing-term life insurance, which is designed to exactly match the repayments required at the point of your passing way. Level-term life insurance pays out a consistent sum, no matter when you pass away. They are more expensive, but in the event of your death, your family may have extra money to cover other expenses.

This insurance policy is designed to cover all or part of your mortgage repayments, in the event that you are prevented from earning through illness, accident, or unemployment. Again, it’s not mandatory, but it can provide you with peace of mind that you can continue to make your mortgage repayments in case the worst happens.

Your decision about whether to take this out may depend on what sick pay arrangements your employer has in place. For example, some will offer the minimum requirement of Statutory Sick Pay for 28 weeks, while others may offer some further income protection as part of their benefits package.

If you are self-employed then taking out income protection insurance may be necessary, unless you have other resources to fall back on, should you become incapacitated and unable to work.

This policy usually pays out a tax-free lump sum in the event that you are diagnosed with a critical illness that prevents you from working. The money can be used to cover mortgage repayments, or put towards rehabilitation expenses. Typical illnesses covered include cancer, cardiovascular diseases, dementia, multiple sclerosis, and strokes.

It’s important to note that during the underwriting process for all of the above policies, the insurer will ask about certain pre-existing medical conditions that you have. It’s important to answer these questions accurately, otherwise you may find that the policy is invalid in the event that you need to make a claim.

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A fee may be charged for mortgage advice. The exact amount will depend on your circumstances. I.I Financial Services Limited is an appointed representative of The Right Mortgage Limited, which is authorized and regulated by the Financial Conduct Authority. Registered in England & Wales company no. 10817448. Registered office Expressway G15, 1 Dock Road, London, E16 1AH