Options When Taking Out Mortgage Protection
Mortgage protection insurance is a decreasing value life insurance product. The value of the cover is designed to drop as the balance on your mortgage decreases. Lenders require this form of cover as part of their security when lending to finance homes. In the case of a joint mortgage, the mortgage protection policy pays out on the death of either party.
Most clients take out the basic level of protection, which is understandable, as it satisfies the banks lending conditions and is the cheapest form of cover.
There are a number of options which we would like to draw your attention to and which you should consider especially when the additional cover is affordable ( as opposed to later on in life when the cost can be prohibitive).
Serious illness cover
Serious illness cover when included as part of your mortgage protection policy will clear your mortgage in the event of a designated serious illness. This is a huge comfort if a serious illness strikes at any time during the mortgage term, which today is typically 30 to 35 years.
Term Life insurance as opposed to decreasing life insurance
This option is usually not too much dearer than mortgage protection but the benefits are considerable. Many of our clients opt for term insurance because the level of cover never changes during the term of the policy. The benefit here is that you are all the time gaining extra life cover as your mortgage is paid off.
The other attraction is that you can use this policy for future mortgages (up to the level of cover on the policy) if you move house. In these situations there will be no need to shop around for new cover when you are older and you may have acquired some medical conditions that you do not have today.
For example, assume you take out a €300,000 life insurance policy and use it today as security for a new mortgage for 35 years. If you move house in ten years time and take a new mortgage over 25 years you can use your existing life insurance policy as security up to the €300,000 level of cover.