Mortgage Life Insurance

Mortgage Life Insurance: Protecting Your Home

Being faced with one’s mortality is never a pleasant issue but it is best to be prepared in any eventuality so that your family has security that they can count on should something untoward happen to you. This is where mortgage life insurance can be an invaluable lifeline.

Mortgage Life Cover Defined

Mortgage life cover is a type of insurance policy that pays out a sum of money which can be used to settle your outstanding mortgage obligations. Should you be diagnosed with a terminal illness or unexpectedly die, the funds from your policy can be sent to your beneficiaries or given directly to your mortgage lender.

There is no investment component under this cover and once the policy expires and you have survived, the insurance company will not issue any payout.

Repayment Mortgage or Interest-Only Mortgage

There are two kinds of mortgage life covers to choose from: repayment mortgage or interest-only mortgage life insurance. Repayment mortgage cover is also referred to as decreasing term insurance whereby your insurance coverage decreases as you pay off more of your mortgage balance. Your insurance cover is reduced in accordance with your decreasing mortgage debts.

With interest-only mortgage cover or level term insurance, the amount of cover under your policy remains unchanged throughout the life of the policy so that your family gets a fixed amount of money at the time of your death.

Most insurance providers include terminal illness cover automatically in either of the two mortgage life policies. You also have the option of including critical illness cover in your mortgage insurance. The beauty of adding critical illness to your cover is that should you be diagnosed with a serious illness and survive from it, you still receive your payout. Just make sure to read the fine print so you know which illnesses are covered in the package.

Mortgage Life Cover versus Mortgage Payment Protection Insurance

Do not confuse mortgage life insurance with mortgage payment protection insurance (MPPI). MPPI provides you with a tax-free benefits that you can use to pay off your mortgage if you are unable to maintain employment due to an accident or debilitating sickness or if you have been deemed redundant and are laid off work. Some lenders require that you take an MPPI with them before they approve your application for mortgage but you can also purchase this from another provider. You will most likely get lower rates plus you have the option of customising your policy so that it specifically caters to your unique situation.