If you have a mortgage, you might be looking for a way to help protect your family in the event of your death. With mortgage life insurance, you can do just that. But how does it work and how do you know if it’s the right choice for you and your loved ones?
What is mortgage life insurance?
Mortgage life insurance is a type of life insurance specially designed to help protect your loved ones if you pass away before a large outstanding loan or debt has been paid in full. If you believe that your family would struggle to keep up with loan repayments should you pass away unexpectedly, then you should consider a mortgage life insurance policy.
How does mortgage life insurance work?
When you take out a policy, you will choose a benefit amount (how much money your family receives if you die) and a policy term (the number of years for which you are insured). You will pay a rate of monthly premiums, knowing that if you die, your family will receive a lump sum payment to help cover the cost of your outstanding loan repayments.
What makes mortgage life insurance different from regular life insurance?
The primary difference with mortgage life insurance is that the benefit amount decreases over time, as your outstanding loan or debt does (however they are not linked). Over the years, you’ll pay off more and more of your loan, meaning you won’t need as much cover down the line. In short, it’s still a form of life insurance but it is tailored to the needs of those who have a debt that decreases.
We created a guide that compares mortgage life and regular life insurance that you can check out.
But will mortgage life insurance pay off my entire loan?
You will choose a benefit amount and a term that aligns with the size of your debt. Your premiums remain the same while your benefit amount decreases. Your benefit amount will decrease gradually as you pay off your debt. This is because the more you pay into your loan, the less insurance you need over time. It’s up to you to choose a suitable benefit amount based on the size of your loan. If you like, you can choose a benefit amount that is more or less than the value of your loan. This means that there’s a chance that there could be a shortfall between the benefit amount and the loan amount depending on the benefit you choose.
Will mortgage life insurance protect me if I can no longer work due to illness or injury?
If you want financial protection should you find yourself seriously ill or injured, it’s possible to add critical illness cover to your policy. With Choozi you can choose to compare mortgage life insurance policies with critical illness. This can help to protect you should you end up critically ill or seriously injured.
In the case that you choose to add critical illness cover to your policy, you will receive a pay-out to help with things such as medical costs and lost income in the event that you are seriously ill or injured. If you die before your mortgage life insurance policy has expired, your family will also receive the full mortgage life insurance benefit amount.
The benefit amount will be paid out following the first event. That means you will receive a lump sum payment if you are diagnosed as critically ill. If you do not make a critical illness claim, your loved ones will receive the benefit amount should you pass away within the policy term. Once the policy has paid out once, your cover will end.
Taking the right precautions
It’s time to start comparing deals from leading UK insurers. With Choozi, we make it easy to compare deals all under one roof. We help you find a policy that gives you the level of protection you need, at an affordable price.