What exactly is Mortgage Life Insurance?

Make sure you don't confuse Mortgage Protection Insurance with Mortgage Payment Protection Insurance - they sound similar but are completely different as we explain below.

Mortgage Life Insurance is designed to pay off your repayment mortgage if you die during the term of the policy.

Mortgage Payment Protection Insurance pays your monthly mortgage repayments if you fall ill, suffer an accident or are made unemployed.

All Mortgage Life Insurance policies sold through the brokers we work with include Terminal illness cover. Terminal illness cover pays out if you are diagnosed with an illness or condition from which you are expected to die within 12 months. If this situation occurs then your entire mortgage will be paid off immediately, helping to reduce financial stress at an otherwise very difficult time.

You only need Mortgage Life Insurance if you have a repayment mortgage. As the amount you owe on your mortgage reduces, so does the sum insured on your Mortgage Life Insurance policy. This means that you never pay for more more insurance cover than you need. This makes it a cheaper option than standard, level term insurance.

If you have an interest only mortgage, the sum owed to your mortgage provider remains constant because you are only paying off the interest with your monthly repayments, not the capital you borrowed. To insure an interest only mortgage you need normal, level cover, life insurance.

Insurance payouts are always tax-free.

If you have a joint mortgage then you should make sure both your names are on the insurance policy. Many mortgage lenders will insist on this.

Joint policies are written on “first life” - so if either you or your partner dies then the insurance will payout and then automatically terminate. The other party will no longer be insured.

PLEASE NOTE:
If you want insurance that covers your monthly mortgage repayments if you were unable to work through sickness, accident or unemployment, then you want Mortgage Payment Protection Insurance.

If you want insurance that will pay your mortgage off if you become seriously ill, you need Critical Illness Insurance.