For the borrower

Mortgage insurance, life assurance, critical illness cover, salary protection, income protection

Confused? Don’t worry, we help you fit the pieces together.

Knowing that you need ‘something’ in place to protect you and your family in the event of ‘something happening’  is a start, but knowing exactly what that ‘something’ is can be confusing.

This table shows the types of  insurance policies available to borrowers to protect themselves, and their families, when taking out a mortgage.

 

PROTECTION FOR THE BORROWER

TYPE OF INSURANCE

 IS IT RIGHT FOR YOU? 

LIFE INSURANCE

Pays out a lump sum if you die during the policy term.

May also pay out if diagnosed with less than 12 months to live.

Available as level or decreasing basis. Level Term is used for Interest-Only mortgages, Decreasing Term is used for Capital and Interest Repayment mortgages.

There is no limit to the amount of life cover you can have.

Yes, if clearing the mortgage would be a top priority if you died during the mortgage term. Suitable for people with no financial dependants if they want to bequeath the property to beneficiaries with no mortgage debt against the property.

Yes, if you have dependants and no other household income to either maintain the mortgage, or repay the mortgage in full.

No, if you have enough funds available to leave to your beneficiaries to repay the mortgage in full if you die.

No, if cover is not available from any insurer due to non-insurability reasons.

CRITICAL ILLNESS COVER

Pays out a lump sum if you suffer a life-threatening illness, such as cancer or heart attack.

Can be used to pay off the mortgage or for anything else.

There is no limit to the amount of critical illness cover you can have.

Yes, if clearing the mortgage would be a top priority in case of serious illness.

Yes, if you have dependants and no other household income to repay the mortgage.

No, if you have enough funds available.

Maybe, if you want to be covered for a wider range of health problems – consider combining with income protection insurance as well.

No, if cover would not apply to you because of an existing illness.

INCOME PROTECTION

Replaces a substantial part of your income if you are unable to work over a long period because of illness or disability (so could be used in part to meet your mortgage payments).

Continues to pay out until you recover, to age 65, die, or reach retirement, whichever is sooner.

Cover is limited to a maximum of 65% of gross annual salary/ net profits.

Yes, if you can afford it and the cover clearly applies to you – for example, if you are in good health and insurable at commencement.

No, if you have other sources of income in the event of illness, for example if you have a policy through an employee benefit scheme. 

No, if cover is not available to you, may be due to an existing health problems, or a dangerous job, or your employer offers this to you via an employee benefit scheme).

MORTGAGE PAYMENT PROTECTION INSURANCE (MPPI),

ALSO CALLED ACCIDENT, SICKNESS AND UNEMPLOYMENT INSURANCE (ASU)

Meets your mortgage payments for either 12 or 24 months if you are unable to work because of illness or unemployment.

Cover is limited to mortgage costs, plus 33% extra.

Yes, if the cover is available to you – for example, if you are a permanent full-time employee, or self-employed, in good health.

No, if you have other sources of income to repay the mortgage in the event of illness or unemployment.

No, if cover would not apply to you, for example, if you are a contract worker, part-timer,  or have existing health problems.

No, if you already have enough cover (perhaps through income protection insurance, or your employer).

FAMILY INCOME BENEFIT (FIB)

Another form of ‘term assurance’ that provides income only, not capital.

Used for family protection purposes.

Pays a tax-free income to your beneficiary if you die during the policy term, for the remainder of the policy term.

Can have level or indexed payments.

There is no limit to the amount of FIB you can have.

Yes, if you have dependants, who would struggle to maintain the household income.

No, if you have enough funds available to leave to your beneficiaries to provide an income for the long term.

No, if cover is not available from any insurer due to non-insurability reasons.

Don’t worry if it seems confusing. We are able to help focus what your priorities should be, ensuring that if that ‘something’ does strike, you have the safety net in place to soften the fall.

We deal with a large number of insurers to provide you with comprehensive, competitive, policies, combined with our advice to ensure you and your dependents are provided for should life throw you a lemon.