When arranging a mortgage it is essential that you consider what life cover you need to arrange in support of the lending. If you have dependents there is a definite requirement for adequate life assurance to make sure that if you passed away, the mortgage is cleared in full and that your dependents may continue to live in your home. Often we also find that partners can be vulnerable if one salary is removed from a household by the death of their spouse particuarly if that person was the main salary earner. To avoid the need to sell the property during a difficult period of loss we would suggest that full cover is arranged and maintained.
A Mortgage Protection policy is basically a decreasing term assurance policy. The policy is set up to mirror the repayment of the mortgage so that you are always covered for at least what you owe on the mortgage. The rate selected for the decrease of the sum assured is always higher than your mortgage rate to allow for fluctuations in rate and also to cover penalties etc.
This is the ideal policy to cover a repayment style mortgage. As you are paying both the capital and interest on the mortgage as you go through the term the mortgage balance reduces. The cover offered by this policy also reduces and as such provides the most cost effective type of adequate life assurance to match your mortgage arrangement.
Of course if you have an Interest Only mortgage where the capital balance does not decrease, a decreasing policy would not be suitable and in this instance we would recommend a Level Term Assurance or a Whole of Life plan.
The banks do not insist upon life assurance in support of your mortgage but they do strongly recommend it. If you would like to discuss what type of life assurance would best suit your mortgage circumstances please contact Paul on 01624 612611 or email us on [email protected] or please complete our online life assurance form.
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