Your mortgage is probably your biggest debt and monthly outgoing, but it ensures you have a roof over your head and a safe place for your family to eat, sleep, play and sometimes even work. Have you thought about protecting your mortgage through life insurance?

If you passed away, would your family still be able to pay the mortgage? What about the general running costs of your home like utility bills? By taking out mortgage life protection, you can help to cover the mortgage and minimise further disruption during an already difficult time.

What is mortgage life insurance?

Mortgage life insurance is basically a type of life insurance that is used for the specific purpose of paying off your mortgage in your absence. It is something you usually take out when you buy a house or have kids, as it can protect both your house and your family from any unfortunate circumstances that may come your way.

If you passed away, would your family be forced to downsize or move to a cheaper area? What sacrifices would they have to make to try and meet the mortgage payments? As a parent, you are most definitely a hero but unfortunately you aren’t invincible. Consider what extra help you need to protect your family home.

Mortgage life insurance is usually aligned with your mortgage term; for example, if you have a 25-year mortgage, your life insurance policy will last for the same amount of time. The amount of cover will mirror the outstanding balance of the mortgage; as the debt on your mortgage reduces, so does the pay-out amount. For this reason, this type of cover is also known as decreasing term life insurance.

How does mortgage protection work?

Take this scenario; you have just bought your first house with your other half and you both rely equally on your salaries to meet the mortgage payments. Due to buying the house, there isn’t much disposable income at the minute. Essentially, you are both very dependent on each other, which might make you feel a little vulnerable. 

Mortgage life insurance can ensure your home will always be protected if the worst happens. If you passed away, the outstanding mortgage would be cleared thanks to the pay-out from the policy.

It’s important to remember that it’s not a legal requirement to have life insurance with your mortgage, but it’s a good idea! Your mortgage provider may offer you life insurance, but you don’t have to buy it from them. You might wish to consider comparing quotes and providers to make sure you’re getting the right deal. This is where we can help.

How much does decreasing term life insurance cost?

Decreasing term or mortgage life insurance is usually the cheapest type of cover. This is because the insurer is less likely to provide a large pay-out, as the amount reduces over time. However, the cost is also based on the typical factors such as age, health and smoking status. This can determine your monthly premiums.

The pay-out is the main difference between level term and decreasing term life insurance. Level term insurance has a fixed pay-out amount throughout the policy length, while decreasing term insurance offers less as you continue to pay off your mortgage.

Should you get a joint policy or two single policies?

If you have bought your home with your partner, you may consider taking out a joint life insurance policy. In some cases, joint policies can be cheaper and it can be easier to set up. However, it’s important to remember that a joint policy will only ever pay out once. 

If you have kids, it’s probably better to have two single policies; one for you and one for your other half.

With many different things to consider, let us help make sense of it all.