How does mortgage protection insurance work?

Taking out a mortgage is a huge financial commitment, carrying a lot of responsibility. If you cannot repay your mortgage for any reason, it can have serious repercussions, including the risk of defaulting on your mortgage and having your home repossessed. Because of the risks involved, many people take steps to protect themselves, their dependents, and their homes against unforeseen challenges by taking out mortgage insurance cover. That way, your home is protected if life takes an unexpected turn.

What is mortgage protection insurance?

Mortgage protection insurance ensures that your mortgage repayments are still met under certain circumstances that mean you cannot make the payments. For example, if you lose your job, become ill, or suffer an injury. It acts as a safety net for you and your dependents, allowing you to remain in your home if the unexpected happens. Typically, mortgage protection insurance will cover your mortgage payments for a set period if you cannot work. Depending on your insurance plan, you may also receive cover for your bills. Usually, you will need to be out of work for at least 30 days before the cover will kick in.

What is the difference between mortgage protection insurance and mortgage life insurance?

Mortgage protection insurance and mortgage life insurance both offer peace of mind and enhanced financial security for you and your dependents.

However, the two types of insurance offer coverage in different circumstances. Mortgage life insurance pays out a lump sum, or instalments, in the event of your death, which dependants can use to clear your mortgage.

In comparison, mortgage protection insurance is paid out if you cannot cover your mortgage payments due to unemployment, illness, or injury.

What is the difference between life insurance and mortgage life insurance?

Mortgage life insurance is specifically designed to help your dependents pay off the mortgage in the event of your death, allowing them to stay in their home and have some financial security.

In comparison, life insurance pays out a lump sum to dependents, which can be used for any purpose.

Mortgage life insurance is sometimes also called decreasing life insurance, as the amount of cover decreases over time as the repayment mortgage decreases.

Are there different types of mortgage protection insurance?

Yes, there are several different types of mortgage protection insurance UK. The best type for you depends on your personal circumstances. Let’s take a look at the different options available.

  • Accident and sickness – Covers your mortgage payments if you cannot work because you become ill or suffer an injury
  • Unemployment – Covers your mortgage payments if you lose your job or are made redundant.
  • Accident, sickness, and unemployment combined – The most comprehensive type of mortgage payment protection insurance, covering sickness, injury, and unemployment.

Other popular alternatives to mortgage protection insurance include mortgage life insurance, critical illness insurance, and income protection insurance.

Do I need mortgage protection insurance?

Taking out mortgage protection insurance isn’t compulsory. However, if you would struggle to pay your mortgage if you lost your job, then it could be a wise move. Knowing that your mortgage repayments are covered if you lose your job or cannot work through illness or injury can also offer you and your family a priceless level of peace of mind.

When can you claim on mortgage protection insurance?

When you can claim on your mortgage insurance depends on the type of cover that you’re paying for, whether it’s accident and injury, unemployment, or a comprehensive plan covering both. Aside from your plan type, there are certain circumstances under which you cannot claim; these include:

  • Voluntary redundancy
  • If you’re sacked
  • If you knew there was a risk of redundancy when you took out the insurance
  • Pre-existing medical conditions
  • Self-inflicted injuries
  • Stress
  • Some back-related injuries and illnesses

For detailed information about the circumstances your mortgage insurance plan does and doesn’t cover, speak to your insurer.

How much does mortgage protection insurance cost?

The price of mortgage protection insurance depends on several factors, including age, job, salary, and mortgage repayments. If you’re employed in a role where you are statistically more likely to be injured, for example, as a manual labourer, then mortgage insurance will likely cost you more than it would for, say, an office worker. Be sure to shop around and compare quotes to get the best deal.

Speak to Mistoria Estate Agents

If you’re selling a house in the North-West of England, speak to Mistoria Estate Agents. We are a leading estate agency with branches throughout the North-West in BoltonWorsleySalfordLiverpoolCheadle-Hulme, and Little Lever. Get in touch via our contact form, or phone

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