Mortgage protection insurance

Mortgage protection insurance is often confused with payment protection insurance (PPI). However, they are different. Mortgage protection insurance covers mortgage repayments, while PPI covers unsecured finance, and payouts are made to the lender.

Some people believe that mortgage protection insurance is only necessary for those with high-risk jobs. Regardless of occupation, it’s available to anyone who wants to protect their mortgage repayments.

Many believe mortgage protection is out of their budget. However, tailored plans mean you could get covered for less than the cost of a Netflix Subscription, ensuring your home is secure no matter what.

Some think that mortgage protection insurance is unnecessary if they have other forms of protection, such as life insurance or income protection. However, mortgage protection insurance provides specific coverage for mortgage repayments, offering an additional layer of financial security and peace of mind.

Life can be unpredictable. If illness or injury strikes, mortgage protection insurance covers your mortgage payments, so you won’t risk losing your home.

Imagine the relief of knowing that, even if you can’t work, your family’s home is safe. It’s more than just insurance—it’s the comfort of knowing you’re protected.

Tailor your policy to fit your life. Whether you want to cover only your mortgage or include extra income protection, there are options to suit your unique needs.

The payments you receive are typically tax-free, so whether you get a lump sum or monthly instalments, there’s no need to worry about tax deductions eating into your security.

Mortgage protection insurance ensures your family can continue living in their home, even in the hardest times, giving you a safety net when they need it most.

Mortgage protection insurance is usually taken out simultaneously with your mortgage. You’ll choose a policy that suits your needs and agree to pay premiums, typically every month.

To maintain the policy, you must pay regular premiums. The amount you pay will depend on various factors, including the level of cover you choose and your circumstances. With our help, you can find affordable protection that fits your budget.

You can claim on your policy if you cannot work due to illness or injury The insurance provider will then pay a lump sum or monthly payments to cover your mortgage repayments.

Most policies have a waiting period, also known as a deferred period, before you can make a claim. This is when you must wait after becoming unable to work before the insurance starts paying out.

The insurance provider will cover your mortgage repayments up to a maximum amount or for a specified period, ensuring your home is protected during challenging times

To be eligible for mortgage protection insurance, you must meet certain criteria. Here’s what you need to know:

• Health requirements: Good health is usually a prerequisite. Insurers may require you to complete a medical questionnaire and provide medical evidence if necessary.

• Age and income requirements: Insurance providers have specific age and income requirements that you must meet to qualify for coverage.

• You do not need to own a home to take out life insurance or income protection. Anyone can do it.

The underwriting process involves a thorough assessment of your application. This typically includes:

• Medical questionnaire: Completing a detailed medical questionnaire to assess your health status.

• Medical evidence: Additional medical evidence should be provided if required by the insurer.

• Disclosure of pre-existing conditions: Disclosing any pre-existing medical conditions that may affect your eligibility or the terms of your policy.

• Proof of income and employment: Provide documentation to confirm your income and employment status for life insurance verification.

Buildings insurance is the only insurance that lenders need you to have. But people who work with mortgages feel that more people should protect themselves.

t's best to bring up your protection needs. Mortgage advisers may ask you if you’ve thought about insurance when you get a mortgage. If something goes wrong and the broker is accused of not mentioning it, they may ask you to sign a disclosure.

This is to say that you did not want mortgage protection insurance when the lender offered it. Nobody wants to think about falling ill or dying. So it’s harder to talk about protection than getting finance to buy your own home.

You should speak to a specialist broker or independent financial adviser if you want mortgage protection insurance.

Advisers are best placed to compare the deals on the market. They'll also determine what type of mortgage protection insurance you need.

A mortgage lender may partner with insurance brokers or providers so that you can check directly with them.

The cost of mortgage protection insurance depends on several factors, as it can include income protection, critical illness cover, and life insurance.

Here’s what affects how much you’ll pay:

• How much income are you covering? The more income you need to protect, the higher the premium.

• Policy duration: How long do you want the coverage to last? Policies can run for a set term or be a 'whole-of-life' policy.

• Deferral period: This refers to how long you can wait before the insurance starts paying after you cannot work.

• Indexation: Do you want the payout to increase with inflation over time? This can affect the cost.

• Payout period (with income protection): How long will the policy continue to pay after you make a claim?

• Guaranteed premiums: A policy with guaranteed premiums will ensure that your premiums remain the same throughout the policy.

• Reviewable premiums: Some policies allow the insurer to adjust your premiums over time.

• Age-banded premiums: Certain policies will increase in cost as you get older.

The flexibility of mortgage protection insurance allows you to choose the type and level of cover that suits your financial situation and needs.

Health and lifestyle

Your health and lifestyle play a big role in determining the cost of mortgage protection insurance. Generally, the younger and healthier you are, the lower your premiums. Here’s how different factors can affect what you pay:

• Smoking: If you’ve quit smoking for at least a year, your premiums could be significantly reduced.

• Age: The older you are, the higher your premiums, as the likelihood of making a claim increases.

• Pre-existing conditions: Certain health conditions may raise your premiums or be excluded from coverage.

• Occupation: Jobs involving higher risks (e.g., working with heavy machinery) may result in higher premiums compared to office-based roles.

Renewing or switching a policy

If you hold a protection policy you might want to renew or switch after a few years.

This will be more beneficial if you’ve made some positive lifestyle changes, such as giving up smoking. It could also be useful if the market has become more competitive. You can discuss this with your adviser.

Be careful as you age, policies become more restrictive, and your health worsens.

It may be best to stick with the policy you took out when you were younger and seen as less of a risk.

Speak to a specialist

Speak to an adviser if you want more information about protection insurance. Or if you're one of the many households in the UK that are not protected.

A specialist can see which form of protection works best for you.