Mortgage Protection

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What is the benefit of mortgage protection?

Most expats take out a life policy that matches the sum insured of their mortgage. With an increasing amount of expats opting for Interest only mortgages, the sum insured amount stays constant for the duration of the mortgage term (Usually between 10 and 25 years). The benefit of taking out cover, is that in the unfortunate event of one or more of the property owners passing away prior to the end of the mortgage completion date, the protection policy will pay out the full sum insured, ensuring that your surviving dependents are left with a fully paid for property.

If I have a mortgage on a UK property, am I required to take out Mortgage Protection Insurance?

There isn’t a generic response we can give to this question. In recent times banks insisted on mortgage applicants taking out a life insurance policy to cover the loan being taken out. However, with the never ending PPi fiasco in the UK, banks are steering clear of making any recommendations regarding financial products. It is now the responsibility of the property buyer to decide if they want to take out mortgage protection cover. When a mortgage offer is made by a bank they will usually prompt you to consider taking out life insurance however it is not compulsory.

What happens if I don’t have mortgage protection in place?

Without a protection policy in place your home is at risk in the event of your early demise. Your surviving beneficiaries will either have to clear the outstanding debt with the bank, or sell the property, usually lower than market price to ensure a quick sale.

What mortgage protection options are available to me?

There are 3 available options to provide you with cover for your mortgage.

1 – Level Term Assurance

The premium (Annual / Monthly) is calculated at the outset of the policy and remains the same for the duration of the term. The sum insured remains the same for the duration of the policy.

The policy pays out on the death of the insured.

This type of cover may be used alongside an interest only mortgage.

2- Decreasing Term Assurance

The premium (Annual / Monthly) is calculated at the outset of the policy and remains the same for the duration of the term. The sum insured decreases over the duration of the policy. The premium is generally cheaper than level term insurance.

The policy pays out on the death of the insured.

This type of cover may be used alongside a repayment mortgage.

3 – Critical illness protection

This provides the applicant with a lump sum equal to the sum assured at the onset of a listed critical condition. The premium is generally more expensive than term assurance as the likelihood of payouts is much higher

This type of cover may be used alongside all mortgages.

What does mortgage protection cost?

Many factors affect the cost of cover including but not limited to: · Age · Country of residence · Smoker · Health status · Amount of cover · Term of policy