Mortgage insurance (also known as decreasing term) offers a payout that decreases over time. It can be used to cover outstanding debts, for example your mortgage, if you die before they're paid off. It means your partner and/or dependants aren’t burdened with having to meet the mortgage repayments without your financial support.
Mortgage life insurance is specifically designed to cover outstanding debts if you die. Because the amount you owe on your mortgage decreases with time, the pay out amount usually decreases in line with this too.
Level term life insurance is different. It pays out a fixed cash lump sum to your beneficiaries if you die at any point in the policy term. The pay out doesn't decrease.
It depends on your circumstances. Often, people choose to get decreasing term life insurance alongside level term insurance. That way, any outstanding debt on the mortgage is covered and additional money is available as a pay out to support loved ones too.
You can buy mortgage life insurance from your mortgage provider, estate agent or you can buy it direct from an insurer for yourself. When you buy a house, they'll ask you about it. However, the person selling you the policy will get a commission for each one sold. You’ll probably be able to find a more cost-effective and suitable product by shopping around and comparing your options first.
You might not need mortgage life insurance if you already have another life insurance policy in place that offers a sufficient payout to clear your mortgage debt. For example, your employer might offer death in service cover, and that's enough to cover your outstanding debts.
That been said, it's possible to have multiple life insurance policies - and in some circumstances this might be the right option. For example, if you want to make sure your mortgage is paid off and you want to leave a lump sum for your beneficiaries.
Mortgage life insurance isn’t compulsory
If you die with outstanding debt on your mortgage, it’ll be paid off from your estate if you don’t have insurance to cover it. So if you haven’t got dependants, or your estate has enough money to cover the cost, you might not need mortgage life insurance.
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The various types of protection policy on offer can have similar, confusing names, but if you know the level of cover that you need, we can help you find the right policy.
With joint mortgage life insurance, if one partner dies, the other will get a pay out.
It's usually cheaper than two people holding separate policies. That's because the cover ends after the first death - there's no payout if the second policyholder dies.
A level term life policy would pay out the same amount, no matter when you died during the cover period.
You set the amount of cover yourself, but if you die after the term ends, you won't receive a payout.
Also known as 'life assurance', whole of life cover does what it says on the tin - it covers you for life and pays out whenever you die. There isn't a specified term.
Some policies require you to keep paying premiums until you die, while others only ask that you pay until a certain age.
MPPI is a form of income protection that pays your monthly repayments if you’re unable to work due to accident sickness or redundancy.
Some income protection policies can offer a death benefit but products like that aren't typically designed to pay off your full mortgage debt with one lump sum.
This type of policy is designed to pay out if you are unable to work due to an accident or illness, or if you're made redundant.
There are both long and short-term policies available, however the payout will only cover a certain percentage of your wages.
This cover can be used to help your beneficiaries cover the cost of your income.
The main difference between family income benefit and standard life insurance is that it normally pays out monthly, rather than a lump sum.
It's worth comparing your options – switching providers could be to your advantage, but you also need to be careful. Life insurance is more expensive for older people or those with health conditions, so you’ll have to pay more if you're looking to arrange cover later in life.
For that reason, it's more common to keep your existing life insurance policy in place, and buy additional cover if your circumstances change.
If you need help working out what cover you need, speak to our partner Assured Futures[¥] for fee-free, impartial advice. Just call 0800 808 6907.
Yes, it's possible to add critical illness cover to all types of life insurance, including decreasing term policies. But your premiums will rise to reflect this extra level of insurance.
By comparing various providers and policies, until you find cover that suits your circumstances. Don't just pick the policy that offers the cheapest premiums though - make sure it'll actually cover what you need it to.
For comparing quotes online, Gocompare.com introduces customers to theidol.com. For help, guidance and advice, Gocompare.com, introduces customers to Assured Futures Limited. Assured Futures Limited is authorised and regulated by the Financial Conduct Authority no. 176392
Your cover will depend on your individual needs, circumstances and the premium you choose to pay
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