Decreasing Mortgage Protection Life Insurance Explained
In the main there are 2 types of mortgage protection insurance. The first sort covers you for loss of life and the other covers you for unemployment, accident and sickness or a combination of all 3. Lets now look at what benefits each one gives and how they can help you.
Mortgage Protection Insurance in it’s basic form is just a life insurance policy. However unlike it’s brother the term life policy it’s payout value decreases throughout the mortgage term. For example lets examine a £100000 mortgage. Normally a mortgage will be taken over a 25 year period therefore the cover will last for the same length of time. The amount outstanding or owing on the mortgage will decrease and the amount of life insurance offered through the mortgage protection insurance will decrease along with the mortgage balance owed.
This means the cost of such polices is minimised as low as possible. However this type of life cover is only suitable for certain mortgage repayment types. Generally if you have a repayment mortgage or a capital and interest mortgage then this life cover will be suitable. If you have kids and your partner or spouse would need a lump sum on top of the mortgage being clear then a term policy or a combination of the two may be more suitable.
The other form of mortgage protection insurance covers your monthly mortgage payments in the event of accident and sickness or one or the other whichever options you see most suitable. For example you are a civil servant with full sick pay for 6 months and half for the remainder, you have worked for the company for 2 years. This person may need mortgage protection insurance for both accident sickness and unemployment as these are limited for a 12 month period. However the person may have a large amount of savings and so protection is not required.
