|
by:
Claire Bowes
Your house
is a big investment – probably one of the biggest you’re every likely to make.
It is also the place that you and your loved ones call home; a shelter and haven
from the outside world. That’s why it is so important to ensure that your home
and family are protected in the event of your death. It’s not a topic that any
of us like to dwell on, but the sad fact is that should you die and the family
are no longer able to afford repayments on the house, they will lose the property
and the roof from over their heads. Having
a good life insurance policy in place to protect your property in the event of
your death is vital. When you die, your family will have enough to worry about
without the added stress of how they are going to hold on to the family home.
Your life insurance policy will ensure that this problem is eliminated, with the
mortgage balance being paid in full upon your death.
The main
types of mortgage life cover The
type of mortgage life insurance cover that you require will depend upon what type
of mortgage you have, a repayment or an interest only mortgage. There are two
main types of mortgage life insurance cover, which are:
Decreasing
term insurance This
type of mortgage life insurance is designed for those with a repayment mortgage.
With a repayment mortgage, the balance of the loan decreases over the term of
the mortgage. Therefore, the sum of cover with a decreasing term insurance policy
will also go down in line with the mortgage balance. So, the amount for which
your life is insured should match the balance outstanding on your mortgage, which
means that if you die your policy will hold sufficient funds to pay off the remainder
of the mortgage and alleviate any additional worry to your family.
With the decreasing
term insurance, the cover is usually taken out over the term of the mortgage,
and payment is made should you die during the term of the policy. Once the policy
has expired, it becomes null and void, so you will receive nothing at the end
of your policy if you are still living. There is no surrender value on this type
of cover, but it does provide a cost effective means of protecting your home and
family during the life of your mortgage. Level
term insurance This
type of mortgage life insurance cover is for those that have a repayment mortgage,
where the principle balance remains the same throughout the term of the mortgage
and the repayments made by the property owner cover the interest payments on the
mortgage only. The
sum for which the insured is covered remains the same throughout the term of this
policy, and this is because the principle balance on the mortgage also remains
the same. Therefore the sum assured is a fixed amount, which is paid should the
insured party die within the term of the policy. As with decreasing term insurance,
there is no surrender value, and should the policy end before the insured dies
no payout will be awarded and the policy becomes null and void.
Terminal
illness benefit Both
of the above types of cover normally include terminal illness cover, which means
that the mortgage is cleared should you be diagnosed with a terminal illness rather
than waiting until you actually die. This helps to ensure that you do not have
the additional worry of trying to meet repayments when a terminal illness takes
away your ability to work and earn money, and at a time when the whole family
has enough to worry about without having to stress about meeting mortgage repayments.
Critical
illness cover Critical
illness cover is another type of insurance policy that can be added on to either
of the above mortgage life insurance polices and provides an extra element of
protection and peace of mind. This type of cover can also be taken out as a stand-alone
policy, but usually proves much better value if simply added on to a main insurance
policy. With
critical illness cover you will be eligible for a payout in the event that you
are diagnosed with a critical illness. If you then go on to recover from the critical
illness, the payout is yours to keep but the policy becomes null and void following
your claim. The illnesses that are covered by this type of policy are defined
by the insurer so you should ensure that you check the terms when taking out critical
illness cover. Adding
critical illness cover to your policy will only increase your repayments by a
small amount, but can provide valuable protection if you are diagnosed as critically
ill and are therefore unable to work. With your mortgage repaid from the payout
of this policy, you will not have the additional worry of trying to keep a roof
over your head at a time when you should be concentrating on trying to make a
recovery. Summary
As
indicated by the features of the two main types of mortgage life insurance cover,
the policy you go for will depend largely upon the type of mortgage you have.
Both types of cover offer value for money, with some really low cost deals available.
Of course, the amount that you pay will ultimately depend upon the level of cover
you require. For total peace of mind it is always advisable to go for a policy
with critical illness cover incorporated into it. Having
some form of mortgage life cover is essential to protect your home and your family.
After working hard to buy your own property, the prospect of it being repossessed
in the event of your death can be worrying both for you and for your family. A
mortgage life cover policy will ensure that this does not happen, and will give
your family the security of knowing that whatever happens they will still have
a roof over their heads.
| 