Most of us are happy to insure our car, house and travel arrangements to their full value, however, few of us take quite as much care over our health and loved ones.
This cover protects you for a given term for an increasing level of benefit.
The amount of life cover chosen at the outset rises annually by a predetermined factor. The premium will also increase.
This cover is renewable with coverage decreasing over the life of the policy at a predetermined rate.
Premiums are usually constant throughout the contract, and reductions in coverage typically occur monthly or annually.
This is a term assurance, therefore you only get a payout within the set 'term' e.g. 18 years. Its level, because the payout you get is fixed from the start of the term until the end. Level term assurance thus guarantees a known lump sum payout upon death within a fixed time.
This is where your mortgage is payed off if you or another policy holder dies during the term of the mortgage.
If you have a joint mortgage, both people need protection insurance.
This cover runs for the same length of time as your mortgage. It ensures your dependants need not worry about repaying the mortgage if you die.
This is when a monthly, regular income is payed out if you die.
This is an alternative to level term insurance. This is designed to replace lost income if the person insured dies.
For this policy, you pay a premium every month. In the event that you die, your loved ones are paid a lump sum.
It is designed to last as long as you do. The cost of cover can be more expensive than term assurance, but there is usually a claim value too.
Is it worth having?
It is sensible to consider cover when you take out a mortgage. It can be useful protection if you have a repayment mortgage and people who are financially dependent on you. It should be remembered that Mortgage Life Assurance does decrease in line with the mortgage debt therefore should you wish to maintain a certain level of life assurance then Level Term Assurance may be more appropriate for you.
How Much Does It Cost?
Mortgage Life Insurance has no investment element as the payment covers the balance of the mortgage. So it’s usually a simple case of the cheaper the better.
Costs depend on you
Policy costs increase with mortgage size and length as well as the likelihood of your death during the term. This means age and whether you smoke are big factors. For those who’ve quit smoking, once a year has passed, it is worth a re-quote as the price may have reduced substantially.
Consider writing in trust
If you die the life assurance payment will then form part of your estate. This may make the value of your estate liable to Inheritance Tax. In many cases you can avoid this by writing the policy in trust – which means the payment goes direct to the trustees for payment to your chosen beneficiaries, avoiding inheritance tax. This is relatively easy to do as with most insurance policies they include the option (and papers) for writing in trust directly, at no extra charge.
Protection Insurance and other products designed to protect you against the loss of income.
These types of plan will have no cash in value at any time, and will cease at the end of the term. If premiums are not maintained, then cover will lapse.
Your home may be repossessed if you do not keep up repayments on your mortgage.
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