Mortgage life cover
No one wants to think about death. This is especially true when you are going through the process of buying a new home or moving into your new home. The reality of effective financial planning, though, is that it forces you to protect you and your family against the unfavorable “what if” scenarios. What if you buy a home and take on a large mortgage for your family. Life is great as long as your family has your monthly income to keep up with the repayment of the mortgage loan each month. However, if something was to happen and you were no longer around, your family would be stuck. The home would likely be repossessed at some point if a new source of funding is not established. Your solution to this problem? Mortgage life cover (as opposed to MPPI).
Mortgage life cover, often referred to as mortgage life assurance, or more specifically, mortgage decreasing term life assurance (MDTLA), pays a lump sum balance on your mortgage if you die during the specified term of the insurance plan. The lump sum is typically paid to your family, though some plans specify that the payout is used to repay the actual mortgage balance. Either way, this financial security means a great deal to your family. You also have the peace of mind to know that your family is protected if something unfortunate occurs.
Mortgage life cover is not to be confused with mortgage payment protection insurance (MPPI). MPPI is part of the payment protection sector that pays monthly benefit payouts to assist in making monthly repayments on your mortgage. This protection is used to help you through periods of unemployment from involuntary redundancy, prolonged illness, or accidents. In other words, it is more of a short-term protection to sustain you, as opposed to a death benefit as is the case with mortgage life assurance.
The benefits of mortgage life protection are fairly obvious. However, it is important to understand your options in the marketplace. Many lenders like to pressure or trick people into buying their expensive mortgage life assurance policies while taking on a new mortgage. Do not be pressured. You are not obligated to buy this protection in order to obtain a loan. Your best value and most affordable MDTLA solutions are usually bought from independent brokers who offer top products at much lower premium costs.
As is the case with many protection products, mortgage life cover offers benefits that are ideally never realized by the covered person. Hopefully, you will far outlive the policy term and you will be able to repay the mortgage on your home with your income. However, the security is certainly worthwhile given the modest costs to buy protection through a reputable provider. Here are a few key things to remember about mortgage life cover:
- It is not mortgage payment protection insurance
- Your mortgage balance can be repaid with the lump sum benefit payout
- You do not have to buy cover from your lender - Look to independent brokers
