Buying a house is the biggest financial commitment you’ll ever make. The mortgage you take out to pay for it will be one of your biggest financial outgoings so it’s important to have insurance cover in place to protect it. Mortgage life insurance (which we call mortgage protection) gives you the peace of mind that comes with knowing that your mortgage will be paid off should you die early. All banks and lenders require that you have mortgage protection in place before they’ll give you a mortgage.
It’s a very simple concept, but as with other types of insurance, there are ways to arrange your policy to maximise the benefits to you.
Mortgage protection is a condition of your mortgage drawdown and if you are unable to secure it, your bank or lender is not obliged to allow you to draw down the money. You could go through the application, bidding, get a loan offer, sign contracts but not be able to actually complete your mortgage because you don’t have mortgage protection in place. We have seen this actually happen.
Some lenders will consider allowing a waiver but only on a case by case basis – generally where there is already an existing level of cover in place or a death in service benefit that would be payable to a married person.
When you take out a mortgage protection plan, you’ll pay a premium every month for the length of your mortgage. The cost of the policy depends on:
• The size of your mortgage – how much cover you need
• The length of your mortgage – the ‘term’
• Your age – you must be between 18 and 74
• If you add specified illness cover
• If you are a smoker
• Your current state of health
• Whether you take out the plan by yourself or jointly with your partner
Most people with mortgage protection cover take their policy out at the same time as they take out their mortgage. If your circumstances have changed in the last number of years, your mortgage protection policy is probably not providing you with the correct level of cover you need.
If you have a mortgage protection policy and would like to review it, we’ll do it quickly and without any obligation.