Mortgage Protection

Life Insurance

Life insurance policies pay a lump sum on your death. They make sure that your dependants have the money they need to maintain a decent standard of living and repay your mortgage and loans if you were to die. There are two main types of life insurance:

Level term insurance

You can use this cover to protect your mortgage, for a fixed monthly premium throughout the term you have chosen. The amount of life cover you have chosen will be paid out as a lump sum if you die within the term. This would typically be taken out alongside an interest only mortgage.

Decreasing term insurance

This cover is typically used to protect a repayment mortgage and is usually cheaper than Level Term Assurance. The plan provides a guaranteed sum of money if you die within the term. The amount decreases over the term of the policy roughly in line with your outstanding mortgage debt. Term insurance policies have no 'cash-in' value at the end of the term, or if you choose to cancel the policy early. This means that the cost of this type of cover is lower than whole-of-life policies given the amount of life cover provided.

Critical illness cover

Critical Illness Cover will pay out a lump sum if you are diagnosed with one of the specified critical illnesses. This can either be for the full mortgage amount or less if this is more appropriate. You do not necessarily have to stop working for a valid claim to be made. Most CIC insurers cover over 25 illnesses, typically including heart attack, stroke, cancer, kidney failure, major organ transplant and multiple sclerosis.