Mortgage repayment insurance is a form of life insurance designed specifically for a mortgage and it comes in two forms: level and decreasing term insurance. Level term mortgage repayment insurance is designed to cover an interest only mortgage where the decreasing cover protects a principle repayment mortgage, the level of cover declines over time in line with your oustanding mortgage.
Before considering cover it is important to know which product best suits your needs. As with any life insurance product it is designed to pay out a cash sum on death.
What can the repayment insurance be used for?
If you have a principal repayment mortgage then the amount of loan outstanding will decline over time, thus the most appropriate cover to protect your oustanding loan is the decreasing mortage cover policy, which is designed specifically for this purpose, providing mortgage cover that declines over time in-line with your outstanding mortgage.
For an interest only mortgage the sum outstanding remains fixed over time and therefore so should your life cover. You will find decreasing cover to be cheaper than level cover as the insurers risk falls over time with the reducing cover, in-line with your reducing mortgage.
Factors to consider when buying mortgage life insurance?
- Will your mortgage repayment insurance need to cover a principal repayment mortgage or an interest only mortgage?
- What tax-free sum would your family require to cover the mortgage should the worst happen?
- How long do think you will need the mortgage repayment cover to last?
- If either you or your partner would need financial support to cover an outstanding mortgage should the other pass away, you could consider taking out joint mortgage term insurance which would pay out on first death.
There are a range of products from many different providers, it is important to compare products across a number of insurers to determine a competitive price. When comparing policies it is important to read the Key Facts and determine the flexibility of the cover, products quoted online can often have reduced flexibility in order to quote a cheaper price, less flexibility means less risk for the insurers.
All mortgage repayment insurance policies we broker are specifically designed for mortgages, including family flexibility benefits. Meaning, if you were to move home or make home improvements and wanted to change your cover, whether the sum insured or the term, you would be free to do so with no additional medical underwriting. This flexibility could prove very useful should something affect your health during the term of the policy.
If you are looking to purchase term assurance for your mortgage and would like further information, some guidance or term insurance quotes then let us know, we are here to help.
For further information about mortgages and mortgage insurance visit Council of Mortgage Lenders insurance guide.
