The Difference Between Life & Mortgage Protection
2 Jan 2020
When most people consider buying a life insurance policy, they do so to ensure they don’t leave their loved ones with a mortgage to pay - the outstanding mortgage debt varies UK-wide from over £215,000 in London through to £79k in the North East. Is that something you’d want to leave your family? If covering your mortgage is your main concern, there are options for you.
Of all the types of insurance you can buy, mortgage related policies seem to be the most mind-boggling. But never fear, here at LifeSearch we can help make it a little easier on your muddled brain. The most important thing to consider tends to be whether you want a life insurance policy or a policy just for your mortgage.
Let’s talk life insurance
Your life insurance policy can be bought at any time throughout your life. You can buy cover that lasts until you die, or fixed term cover where you can choose how long your policy lasts. Most people choose to buy term cover that will last until their mortgage is paid off, or until their children are old enough to be self-sufficient.
A standard life insurance policy isn’t just to cover a mortgage. The money can be used to ensure that your loved ones get to continue living their lives the way that they love, not just continue living in your home. If you have dependents who rely on your income for a lot of things in their lives, like cars or school, then perhaps a life insurance policy geared to cover more than your mortgage would be more suitable for you.
Whole-of-life assurance provides you the peace of mind of being covered whenever, whatever, but is substantially more expensive and a longer investment than term insurance. No matter your needs or your budget, there will definitely be a policy that will cover you, but it’s important to know what you’re looking for so you’re not pointlessly paying forever.
What is mortgage protection cover?
Whilst there are a crazy number of different types of policy designed to cover your mortgage, the overarching principle remains the same. It’s all about protecting a person and their home by covering the cost of the mortgage should something happen to the home-owners.
Typically taken out at the same time as your mortgage, mortgage protection cover is designed to last the length of your mortgage, with the intention of unburdening your loved ones of mortgage payments in the event of your death. If this is the kind of comfort that you’re looking for from your mortgage insurance product, then definitely opt for mortgage protection insurance.
What’s the cost?
The biggest difference between a life insurance policy and a mortgage protection policy is that the former can be used for anything your loved ones need, and the latter is essentially designed to cover just your mortgage - although you could still use a payout on this or other things. If a mortgage is your only big financial commitment but your partner still relies on your income to pay it, mortgage protection cover might be a better fit for you than a catch-all kind of life insurance.
Another difference is in price. Whilst price will hugely vary from person to person, and mortgage to mortgage, mortgage protection tends to be cheaper than life insurance as it’s a decreasing risk - the more you pay off over time, the less your pay out will need to be.
With so many possibilities to consider when you are seeking out Mortgage Insurance, picking out a policy should not be the work of a moment. Call the LifeSearch team now, on 0800 316 7253, and we can help you to achieve some clarity about the options that would be best for you.