Your home is likely to be your most important asset and, if you’re thinking about your life insurance, making sure that your family have a roof over their heads if you’re no longer there to help them is perhaps your first consideration.
The right mortgage life insurance can guarantee a payment if you were to pass away that would cover the remaining debt on your property, allowing your dependants to put any concerns about meeting mortgage repayments aside.
Should you die without such cover any remaining mortgage debt would be set against the value of your estate and – if the debt exceeds the worth – the property may be repossessed and sold to cover the deficit.
If, on the other hand, you had a joint mortgage, the debt would become the sole responsibility of the survivor who may not have the income to cover the payments, and may be in a distraught state after their loss.
Dedicated mortgage cover is typically a term insurance product and your main choice is likely to be between decreasing term insurance and level term cover.
A decreasing term policy offers lower levels of cover over time in line with your mortgage repayments and the gradual reduction of your mortgage debt.
An alternative to a decreasing term policy is a level term policy, which is likely to be more expensive because it offers a lump sum that stays at a guaranteed level throughout the term of the policy. How to get the right life insurance
Such an option may be chosen if, for example, you want to cover an interest-only mortgage for the policy term, or if you want your dependants to have a lump sum on top of clearing mortgage debt.
A more expensive and less common alternative to term insurance is whole of life insurance which guarantees to pay out on your death, rather than within a set period of time (‘the term’).
Whichever option you choose, it’s important to remember the cover you have should you come to remortgage and, perhaps, increase your mortgage debt; you may be left in a situation where your life cover is no longer adequate to pay off the mortgage.
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