With the average monthly mortgage payment taking up 18% of the average households income, what would your family do without your income? Although it’s not nice to think about, it’s essential that you consider the financial impact if you were to pass away. Mortgage protection insurance, or decreasing term life insurance, is designed to pay out a lump sum to pay your mortgage in the event of your death.
Mortgage protection insurance decreases it’s payout over time. This is usually in line with the size of your mortgage. Often, a mortgage lender will insist that life insurance must be in place before you start your agreement. However, banks are known for pushing their own (expensive) policies, rather than offering you a policy from the whole of the UK market, unlike Freedom to Insure. We have access to the whole UK market and can get you the most competitive and relevant policy.
What is mortgage protection insurance (decreasing term life insurance)? How does it differ from level term life insurance?
Mortgage protection insurance (MPI), often referred to as decreasing term life insurance, pays out a lump sum if you died. The payout would be used to pay off the amount remaining on your mortgage. As mortgages reduce as you make monthly repayments, the life insurance benefit will do the same. For example, at the start of the policy the benefit may be £250,000, the same value as your mortgage. After 10 years of repayments, the benefit may be £150,000, matching the amount you have left to pay on your mortgage.
Level term life insurance pays out a set amount if you die within a certain period. For example, a policy which pays out £100,000 if you were to die at any point in the next 25 years. Mortgage protection insurance differs to this as the benefit reduces over the term of the policy. However, both policies are designed to provide financial security to your family if something were to happen to you.
Why do I need mortgage protection insurance?
For many families throughout the UK, mortgage repayments are their largest and most important monthly outgoing. Similarly, 1.4m households in the UK struggle to make that payment every month. That begs the question, how would your family cope without your income? Mortgage protection insurance, or decreasing term insurance, gives your family financial security if the worst were to happen. It means that if you were to pass away, your loved ones could remain in the home and have one less worry at a difficult time. In short, if you have a mortgage, life insurance is essential.
In addition, most banks will insist you take out a life insurance policy to ensure you’ll be able to afford to keep up with repayments or pay back the principle loan. These are often overpriced as they are sold by the bank, for the bank. You are free to put in place you own cover and that is where Freedom to Insure comes in!
How much does mortgage protection insurance cost?
Mortgage protection insurance is one of the most cost effective life insurance solutions. This is due to the benefit reducing over time, meaning the potential cost to the insurer decreases. Although your premiums will remain consistent, you will be protected as soon as your policy is in place, until your policy ends or you repay your mortgage.
Freedom to Insure have access to the whole of the UK market, unlike other brokers and banks. We are an independent intermediary, with no ties to specific insurers. Our team of fully-trained insurance specialists are here to find the best policy for your requirements at the best possible price. Once we have discussed your needs, we will provide you with a tailored quote.
If you want to find out more, or get a free no obligation quote, fill in the form below. One of our mortgage protection insurance experts will be in touch. Alternatively, give us a call on 0800 288 9151, or visit our contact page.
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