What are the options available to protect my mortgage?

Question

Is life insurance the only way to insure my half of the mortgage would be paid in case of my death?

(I'm in the UK)

Answer 1

Ivan your answer is incredibly dangerous for people. People need to understand the risks involved, i.e. how would I pay my mortgage if I became sick. They also need to understand what products are available to protect them against such outcomes and the cost involved. They can then make an informed choice as to whether they want to purchase such products or not.

To categorically state that insurances such as critical illness protection and income protection is incredibly dangerous and irresponsible. I know people who have benefited from such policies when they have most needed them.

I would be interested to know what qualifies you to offer such advice and would you be willing to stand by it in the event that this person you are advising suffers a critical illness and cannot pay their mortgage?

To answer the question that was originally asked, if you want to pay your half of a mortgage in the event of you dying then yes you will need some sort of life assurance. You may find that you have some life insurance already, for example Death in Service benefit via your company pension.

If you don't have this then you will need to purchase separate life insurance. It soun ds as if you have a joint mortgage so usually the most cost effective way of buying this is on a joint life first death basis. This means that you take one policy out jointly and then the policy pats out when the first og you dies. You can do separate policies but this is more expensive.

If your mortgage is a repayment mortgage then you will need a decreasing term policy, one where the insured amount reduces as your mortgage reduces. If you have interest only you will need level term, so the insured amount doesn't reduce.

There are lots of other policies that you should seek information about i.e. critical illness protection and income protection and the best way to do so is to go and see your local Independant Financial Adviser who is properly qualified to advise and help you.....not like Ivan who is a cynic with no qualifications and who would not be prepared to stand by his advice.

Answer 2

I work for an insurance company and we have what is called a creditor department.  They deal with all credit protection policies ranging from business overdrafts and loan to mortgage protection policies with a range of cover, incl accident, sickness, unemployment and accidental death.  These policies are usually taken out when the loan/mortgage etc is set up and it is done through the lender (banking branch if your lender is a bank).  You should be able to contact your mortgage provider to see if they offer a mortgage protection policy.  These policies are unlike life policies as they do not pay out a lump sum, instead they pay off your mortgage for the period you are off for up to a year.  Hope this helps.  Good luck.

Answer 3

Hello,

(ANS) The problem is here that the situation your talking about tends to be a catch22 type scenario. OK! What do I mean here? Well you want some type of product that can protect or cover mortgage payments in case of certain situations. OK! what your really talking about is some type of Mortgage protection insurance or income protection insurance.

No.1 YES! You will probably find that your mortgage company or lender will be only to happy to sell you some kind of insurance of that kind. BUT be careful here because many of these policies are NOT worth the paper they are written on, because they often contain so many hidden clauses or T&C in the small print that your chances of actually making a successful claim are VERY slim to frankly zero.

No.2 Mortgage companies & lender like selling such products because THEY make a nice fat commission fee from selling this product to you, even though its almost useless.

No.3 You can buy "income protection" insurance from a) A broker or b) online websites or c) your existing insurance company. But again the problem is income protection insurance is almost equally useless as the number of hidden clauses or T&C in the small print make it almost impossible to make a successful claim even if you become unemployed legitimately.

No.4 The reality is that you CANNOT insurance against ALL possible eventualities in this life. Buying an insurance policy will only give you a false sense of security.

No.5 At a time of down turn or recession when every penny counts for most people buying another insurance policy will only add extra financial burned to your expenses. I personally wouldn't do it given what I have seen of the insurance industry, they sell products on the basis of OUR irrational fears.

**Insurance companies are quick to take your money but extremely slow to pay out even in genuine cases.

**The x3 worst insurance products to avoid totally are:- Critical Illness insurance, Income protection insurance, payment protection insurance on CC's or loans the banks love them but they are a total rip off i.e. that's how banks make massive profits in part, selling us useless products.

Kind Regards Ivan