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About Mortgage Protection Insurance?

it is always going to be better for you to have this type of protection on your
If you own a home, then you might be worried about what is going to happen if you die and you have yet to finish paying off your mortgage.
Well, there is something that you can do to put your mind at ease, and that is by taking out something called mortgage protection insurance. In this article, we are going to be looking at mortgage protection insurance, the difference between this policy and another type, as well as how it works and what policy you are going to need.If you want to know more about this type of insurance, then keep reading down below to get all the information that you could possibly need.

What Is Mortgage Protection Insurance?

The first thing that you need to know is what mortgage protection insurance is. If you or another one of the policy holders die during the term of the mortgage repayment, then this type of cover will pay off the rest of the mortgage. If you have a joint mortgage, then both of you need to have taken out this type of cover for it to be valid. It runs for the same amount of time for your mortgage, so for example, if you take out a mortgage that is supposed to last for 10 years, then your mortgage protection insurance policy will also run for 10 years.
The value of your policy will decrease the longer that you have it. For example, after 5 years, the policy will only be worth half of what it was originally if you have taken it out for 10 years. This is one of the only insurance policies that decreases in value over time, and it does this to run alongside your mortgage. So, the more you pay off, the less the insurance payout to the lender is going to be if you die before finishing your repayments.
Something else that you need to know is that it is required by law for the lender to check that you have secured this type of insurance before you can take out a mortgage. However, here are some circumstances in which a lender might be able to let you take out a mortgage even if you don’t have this type of cover. Keep in mind that this is not a common occurrence, and it is always going to be better for you to have this type of protection on your mortgage. One of these circumstances is if you are over 50 years old. Another is if you are buying an investment property as you are likely to sell this on to someone else. Or, your lender might be able to give you a mortgage if you cannot get this type of insurance for any reason, or if you have some kind of other life insurance policy in place.

Whether you choose to take out life insurance or mortgage life insurance, the payout that is received by your family or financial dependents could help to pay off the rest of your mortgage. As you can tell by the title of both insurance policies, they have been designed with a different kind of protection in mind. Where mortgage insurance is specifically to pay off the mortgage if the policyholder dies within the repayment period, life insurance could be used to help your family maintain their lifestyle or help to cover everyday living expenses.

Some people take out a life insurance policy to ensure that their loved ones are looked after and don’t have to worry about finances for a little while after they pass away. They do this so that they have time to grieve without worrying about paying for everything in the process. For others, the most important thing is that the mortgage gets paid and that there is always going to be somewhere to live for their dependents.

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Each family has its own set of priorities, and this needs to be considered when you are trying to decide whether you should get life insurance or mortgage life insurance.

How Does It Work?

When you buy a home, you need to take out mortgage protection insurance to ensure that if something does happen to you while you are repaying it, the mortgage gets paid. Without this, you might be refused a mortgage, but we talked about this further up in the article. You need to apply for this type of insurance the same as any other, which requires you going to a lender, telling them how much you need to borrow and agreeing on repayment terms with them. The lender will work out what your repayment schedule is going to be based on how long you want the mortgage for, and how much you are looking to borrow. Once you have agreed on this with the mortgage provider, you need to go to a lender who will provide you with the mortgage protection insurance.

Tell them the terms that you have agreed with the mortgage lender and they will be able to tell you whether they are willing to offer you the protection that you are looking for. Your protection insurance value will decrease as you make the mortgage repayments. So, if your policy is worth £130,000 and you take this out for 10 years. Say you have made 5 years of repayments when there are 5 years left on the policy, it will only be worth £65,000. It is a decreasing policy, and there aren’t many others like it on the market, but it makes sure that your mortgage will be paid should you die.

If all of this is in place and then you die, there will be a lump sum paid out to your mortgage lender. This means that your mortgage has all been paid off and that the house is officially owned by you. The good thing about this is that if you have left the house to anyone in your will, or stated that it is to be sold and the money shared, there is no longer a mortgage hanging over the house.

What Policy Do I Need?

So, how do you know what kind of policy you need? It is not an easy thing to decide, and it is going to require that you sit down and think about who and what you are trying to protect. When you have a family such as a partner, children, or any other financial dependents, you need to think about what you can do to financially protect them in the event of your death. This could mean taking out a life insurance policy to make sure that they have a lump sum paid to them to help with all the living expenses after you are no longer around, or it could mean taking out mortgage protection insurance so that they always have somewhere to live.


Something that you can consider is discussing this with them and see what they think you should do. After all, once you are gone, there is not much that you are going to be able to do, but knowing what they would find most useful can come in handy when you are trying to pick a certain type of protection.


If you know that your partner or children are going to struggle to make the mortgage repayments and could face losing the house altogether, then you might want to consider protecting the mortgage above everything else.


This way, you know that they always have somewhere to live, even if they fall on hard times at any point. However, you might know that the day to day living expenses are going to become tight, and your family might end up struggling, in which case you might want to consider life insurance as the lump sum will be paid directly to them.


Regardless of what kind of policy you decide to take out, providing your family with some kind of financial stability and security is the entire point of taking out insurance. If you aren’t exactly sure what kind of policy you should be taking out, then you can talk to an insurance broker or adviser, and they will be able to advise you based on your individual needs. As we said, everyone is different, and that is why you need to do what is best for you and your family. Talking to an expert might give you a completely new perspective that you didn’t think of, which could open new doors for you in regard to insurance. Just make sure that you are doing what you think is best, and that is all that matters.


We hope that you have found this article helpful, and now know everything that you need to about mortgage protection insurance. You should now know what it is, how it works, what the difference between this and life insurance is, as well as how to know what kind of policy you are going to need!

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