There are different types of insurance available covering different aspects of your life, we’ll help to make sure that your family are protected.
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Steven from Mortgage Co discusses why mortgage protection is so important for you and your family and the type of policies available.
Why is mortgage protection so important?
The mortgage protection side of a mortgage application is really the most important part. Life events happen and therefore insurance is there to protect you against the detrimental effects of those life events.
Mortgage protection is an all encompassing term, so for example, it could include building’s insurance to protect your property from natural disasters and content insurance, for if you’re unlucky enough to be burgled. At the other end of the spectrum, if you were to get a critical illness, be unable to work, get made redundant, or even die; these are all things that you can protect against.
Protecting against life events is so important and it’s possible to create bespoke policies around the client’s exact circumstances.
What happens if mortgages have been completed without protection?
The homeowner would be left with a big mortgage to pay and the possibility that they can’t afford to do so. Unfortunately many younger people have the philosophy that they are fit, have no health issues, etc, so they don’t need any cover.
The truth is, we all know people who have got heart problems or are suffering from cancer. We all know somebody that’s been burgled, lost a job or is unable to work for various health reasons. Mortgage protection is all about protecting against the ‘what ifs’.
Why do we need life insurance?
If a couple for example were buying a house together, with both incomes used to maximise loan affordability and anything happens to either applicant further down the line, there’s going to be financial implications for the other person.
As the remaining partner is unlikely to be able to afford the mortgage alone they would probably have to sell the house. Life insurance would pay off the mortgage for the surviving partner should the other person die.
Do I need critical illness cover?
Critical illness cover pays out on a defined critical illness, for example, cancer, heart attack and stroke. Depending on which insurance company you use they could also pay out on another 200 potential illnesses.
Should you be unlucky enough to contract a critical illness, your policy could repay your mortgage, easing the financial and emotional burden while you receive treatment.
What is income protection?
Income protection is guarding against loss of income if you’re not fit enough for work. If you have an accident and are unable to work for an extended period of time, for example, you may have sick pay through your employer of three months and then go onto statutory sick pay.
An income protection policy will pay out a defined income until you either go back to work or the policy ceases. So instead of paying out a lump sum, income protection pays a percentage of your income for each month that you’re unable to work.
Can you combine policies?
There isn’t a blanket policy that covers everybody, so a bespoke policy designed around a client’s circumstances is the best way to proceed and this allows you to combine different insurance policies. A suite of policies is more commonly taken rather than just life insurance, critical illness or income protection.
Life insurance is generally quite cheap because there’s less of a chance of it paying out, whereas critical illness has a greater chance of paying out, therefore it’s a lot more expensive. Mortgage and income protection is very adaptable to the client’s budget. It’s possible to adjust the premiums to an affordable level, for example, by reviewing the circumstances in which policies pay out or the length of time they will continue to pay out.
What is family income benefit?
If clients have children, family income benefit is a beneficial cover to consider. In the event of the policy holder dying, it pays the family of the policy holder a defined amount of money each month until the youngest child turns eighteen or twenty-one. Cover is usually taken to mirror the level of monthly income you have so that this amount can continue to be paid posthumously.
Can you update your policy over time?
It’s standard for people to cover what’s important to them at the time of taking out the protection. A Mortgage Broker like ourselves would usually contact clients annually to make sure the policies are still fit for purpose and represent value for money for what they actually need.
How do I plan for inheritance tax?
There are a couple of different options available to plan for inheritance tax. Putting a policy into trust to avoid inheritance tax or looking at joint life, second death policies rather than first death, which are traditional in mortgage protection.
How much should I budget for mortgage protection and life cover?
Products are designed around the client’s budget so it can be as cheap or as expensive as you want. For example some clients pay £5 per month and others pay hundreds of pounds per month. Anything is better than nothing when it comes to mortgage protection.
How can Mortgage Co help?
It’s so important to get the correct policies and a specialist like ourselves, who offers whole- of-market mortgage and protection advice, can ensure we take everything into account.
If you have any questions on anything regarding mortgage protection policies, navigate to the contact page on the Mortgage Co website or contact Stephen directly via phone or email and we can discuss your bespoke requirements.
Income protection: Protect your income in case the unexpected happens.
Income protection insurance can be a valuable way of making sure you are able to meet your outgoings should you be unable to work. By providing a monthly income if you are unfortunate enough not to be able to work in the event of injury, illness or redundancy. This means you and your family are protected from financial difficulties including mortgage payment arrears.
In contrast to critical illness, the types of illness covered by these policies are not necessarily life threatening but may still mean that your unable to continue doing your job. A qualified mortgage and protection advisor can explain the benefits so please call for further information.
Critical illness: Just in case you need it.
It’s easy to think that a critical illness won’t happen to you, but if it did you would want protection. Mortgage Co can help put critical illness cover in place to ease your recovery by paying out a lump sum or regular payment upon diagnosis of a serious illness. This could cover your care and treatment, recuperation, help pay off your mortgage or make up for any lost income.
Many homeowners purchase life insurance when they take out a mortgage however relatively few take out critical illness cover despite being more likely to need this type of cover. Critical illness cover pays out when the worst happens and you are diagnosed with an illness specified in your policy during the term of the plan. For more information or to find the right policy for you please get in touch.