Mortgage Protection Insurance
Mortgage Protection Options
Life insurance is a form of contract that pays out a lump sum to your dependents if you die during the policy term. The cost is determined by a range of factors including your age, health and lifestyle.
Why Should I Consider Life Insurance?
Life insurance is a vitally important element of financial planning for anyone who has dependents. This means, for example, your partner, children or anyone else who relies on you for financial support. Considering your death and its effects on your family can be distressing. As a result, some people simply ignore the issue. However, this can put your loved ones at financial risk and it’s much better to tackle the issue head-on and take out life insurance
How Does Life Insurance Work?
One of the most popular and effective types of life insurance is called ‘term’ insurance. It pays out a pre-agreed amount as a lump sum or on occasions, as a regular income, if you die before the end of the term. The choice of sum insured and length of term is yours. You may decide to have cover in place for the length of the mortgage or until the children have left home. Our experienced advisers can help you with these decisions.
How Much Does Life Insurance Cost?
Life insurance policies can start from as little as £5 a month. The costs will vary, however. It depends on your age, general health and your occupation. Other factors taken into account are whether you are a smoker, the length of the term and whether you choose to include extras on the policy such as critical illness cover.
One alternative to simple term insurance with a fixed cover for the policy term is decreasing term insurance. Here, the amount of cover where the amount of cover reduces over the years and this is often in line with the reducing balance of a mortgage. As a result, decreasing term insurance typically costs less than term insurance.
Taking Out Life Insurance When You Are Younger
As a rule of thumb, the younger you are when you take out life insurance, the cheaper your policy will be. When you are in your 20s life insurance is unlikely to be your priority. but our research has indicated that taking out a policy in your 20s can be as much as two times cheaper than taking out life cover when you are over forty. Of course, insurers know that you are less likely to claim the younger you are.
If you are buying a first home, thinking of having children or getting married taking out a life insurance policy when you are younger can be an effective way of planning your financial future.
Critical Illness Cover
Critical Illness Cover is a type of insurance. It pays a tax-free lump sum if you are diagnosed with one of a list of specified illnesses or medical conditions during the policy term. Could your family afford to live, pay the bills or meet ongoing mortgage payments if you became very ill and could not work? If not, then why not consider the ultimate in peace of mind provided by critical illness cover?
A critical illness policy typically pays you a tax-free lump sum if you are diagnosed with one of a pre-advised list of serious illnesses during the life of the policy. The money can be spent however you choose. It can, for example, provide a means of settling pressing bills, pay off the mortgage or be invested to provide an ongoing income for your family.
Children’s Critical Illness Cover
Some insurance providers also offer children’s critical illness cover at no extra charge, though the payout is usually limited to between £10,000 and £25,000.
Conditions and Exclusions
With critical illness insurance, it is important to read the small print carefully so that you understand exactly what is covered by the policy.
There is typically a long list of conditions; insurers can include more than 60 ailments and injuries. However, they may not pay out unless the illness is severe or has permanent symptoms. As an example, some types of cancer are excluded because medical advances mean that they are more easily treatable. In addition, some cancer claims cannot be processed until the illness reaches a certain stage.
A mild stroke or heart attack may not count as a critical illness for reasons of severity. Therefore, it is always vital that you are aware of the exclusions that are listed in the policy terms.
Income Protection Insurance
Income protection insurance is a long-term insurance policy that will help you if you can’t work because you’re ill or injured. It ensures that receive a regular income until you are able to return to work. There is often a waiting period before the payments begin which is normally linked to how long your sick pay continues. You can normally claim as many times as necessary whilst the policy remains in force.
Do I Need Income Protection Insurance?
The ABI advises that over a million workers are unable to work every year owing to illness or injury. Check first what your employer will provide if you are sick. Even if you have no dependents, if absence from work through illness means that you are unable to pay the bills then you should consider income protection.
Who Won’t Need Income Protection Insurance
There might be a number of circumstances that mean you do not need to protect your income. You may be able to manage on your sick pay or government benefits. Perhaps you have enough savings to support yourself or you are able to take early retirement. Alternatively, you may have a partner or family member who may be able to support you throughout your illness.
How Much Does Income Protection Insurance Cost?
Your monthly payments will depend on the policy and your circumstances. The cost of a policy will vary according to a number of factors including your age, occupation and whether you are, or have ever been a smoker. Other considerations include the waiting period before the policy begins to pay out, the scope of illnesses and injuries that are covered and your prevailing health.
Affordability and Acceptance
Payment of Monthly Premiums
An insurance policy will cease to provide cover if you stop paying the premiums. That is why we will always check that you can afford the premiums before you commit to the policy. Mortgage protection policies do not typically have a surrender value and you will not receive a pay-out should you survive to the end of the policy.
Reducing the Costs
Policy premiums are calculated according to the likelihood of a claim. So, it makes sense that older or more unhealthy applicants will pay higher monthly premiums. By making healthier lifestyle choices, such as stopping smoking or losing weight, it is sometimes possible to reduce the cost of premiums.
Choosing an Insurance Provider
Because data is published regarding insurance companies’ claims it is possible to compare their performance and recommend accordingly. One firm may charge a low premium, but they might also turn down a larger amount of claims. You will be guided in this respect by our experienced advisors.
Full Disclosure of Health Questionnaire
You can boost your chances of a successful claim by filling in the application form carefully and accurately.
Be sure to answer all the questions in detail, and pay full attention to the medical questions. Insurers can refuse claims if the policyholder failed to disclose all relevant health issues.
We understand that life insurance can be a confusing and often intimidating subject. If you have questions please give us a call and we’ll be happy to help.
Factors Affecting Cost of Mortgage Protection Insurance
If you have pre-existing ailments or ill-health an insurer will take these into account when quoting premiums.
Smoking is a huge red flag for insurers as it can affect many aspects of your health. Sometimes the premiums can even be doubled!
Mortgage protection products are always less expensive when you are younger as there is less chance of you claiming.
Mining and fishing and jobs command higher premiums as do risky and dangerous leisure pursuits such as rock climbing.
Women are likely to live for five years longer than men, pay premiums for longer and enjoy lower rates as a result.
Insurance underwriters have access to DVLA files. They can see your driving indiscretions and may adjust premiums accordingly.