Covering the Mortgage with Protection Insurance. What you need to know.

Interest-only or capital repayment mortgage?

This will determine whether you need to take out level term assurance or decreasing term assurance. You can cover yourself in the event of death and/or death or Earlier Critical illness.

Decreasing term assurance – is paid over a fixed period of time. The level of pay-out decreases over the length of the policy. It’s used to cover the balance of a repayment mortgage because this is a type of loan that also decreases over time.

Level term assurance – this will pay out a lump sum if the life assured dies during the term of the policy. The lump sum is fixed at the start of the policy and remains the same throughout the term.

Should I cover the mortgage in the event of death or critical illness?

According to the office for national statistics 1 in 2 people will get cancer at some point in their lifetime, the most claimed on conditions are Cancer, Heart Attacks and Stroke.

Would you want to pay off the whole mortgage in the event of a Critical illness? The answer may be a yes however this will depend on your budget, if you have a large mortgage then you may have to pay a hefty premium.

In this case, it may be best to cover the mortgage in the event of death only. And then alongside this, you take critical illness cover which will run until your retirement age to give you cover throughout your working life, This will allow you to either pay off part of your mortgage, seek private medical care or make adaptations to your home or just give you some breathing space to focus on getting better.

This will be more cost-effective and will allow more comprehensive cover for your budget.

How will you pay your mortgage payments if you cannot work due to illness or injury?

This is important and you need to check if your employer will provide you with sick pay, If they do have it ask them how long they will pay you for? If you are self-employed then this should be a priority for you.

Did you know most employers will only offer Statutory Sick pay? Statutory sick pay (SSP) is paid to employees who are too unwell and unable to work for a period of four days or more. Currently, the SSP rate for employees who are eligible is £96.35 per week, for up to 28 weeks.

So approximately £385.40 pounds every 4 weeks, Will this be enough to pay off the mortgage and maintain your necessary expenditure? No matter who you are or how much you earn you need income to maintain your expenditure.

You solve this problem by taking out income protection insurance but what is Income protection insurance?

Income protection insurance provides a monthly replacement income of BTW 55% and 70% (depending on provider) of your gross annual earnings to cover your essential outgoings should you be unable to work due to accident, sickness and injury. You can be covered up to the age of 70.

This can be set up to cover your expenditure such as the mortgage and can be set up in a multitude of ways to suit your budget and requirements.

If you have savings and you think you do not need income protection ask yourself how long will my savings last should I need them, most people in the UK would not be able to keep up with bills after 1 month.

Income protection is the most overlooked and yet is arguably the most important protection you can have.

I have an existing policy for my old mortgage should I keep it?

We will always take your existing arrangements into account and we will always primarily assess whether your existing policy can be amended to meet your new requirements or whether we can just take out an additional policy to cover the additional outstanding balance on your mortgage.

I have employee benefits, why should I take out insurance?

It is important to understand that Employee Benefits are often Benefits in Kind, meaning the benefit stops as soon as you stop working for your employers.

Therefore, if you have no other insurance in place, you and/or your family could be vulnerable if you switch jobs, are made redundant or are dismissed.

Always check with your employer and get confirmation of exactly what you have in place. We will help you assess all your provisions to help you make an informed decision.

When is the best time to start looking into cover for my mortgage?

The best time is always as soon as possible especially if you have a large mortgage or you have pre-existing medical conditions.

Depending on your medical history and the size of your sum assured you may have to provide medical evidence such as a GP report and a nurse screening which may include blood tests.

This is why simply getting quotes online and then waiting on your mortgage to start is a bad idea as you may have to get medical evidence first.

Once an insurer has offered terms you have in general up to 90 days to act on those terms. This means if you get done in advance you will have cover when your mortgage starts.

I have pre-existing medical conditions can I get insurance?

The short is the answer is it depends on what conditions you have had and what budget you have.

When you have an Assessment with us, we will take the time to research your medical history. We do this by collating and analysing your medical history, package it intelligently for insurers and re-insurers, and then negotiate terms across the entire insurance market.

You will always get an estimate on how much you are likely to pay. This will depend on you supplying all you know about your medical history to the best of your knowledge.

Please note: an online quote is just that – a quote – it isn’t a definite offer of cover. What really matters is the premium you are offered, after your application has been assessed.