Your house is a big investment – probably one of the biggest you’re every
likely to make. It is also the place that you and your loved ones call home; a
shelter and haven from the outside world. That’s why it is so important to
ensure that your home and family are protected in the event of your death. It’s
not a topic that any of us like to dwell on, but the sad fact is that should you
die and the family are no longer able to afford repayments on the house, they
will lose the property and the roof from over their heads.

Having a good life insurance policy in place to protect your property in the
event of your death is vital. When you die, your family will have enough to
worry about without the added stress of how they are going to hold on to the
family home. Your life insurance policy will ensure that this problem is
eliminated, with the mortgage balance being paid in full upon your death.

The main types of mortgage life cover

The type of mortgage life insurance cover that you require will depend upon
what type of mortgage you have, a repayment or an interest only mortgage. There
are two main types of mortgage life insurance cover, which are:

• Decreasing Term Insurance
  
  
• Level Term Insurance
  

Decreasing term insurance

This type of mortgage life insurance is designed for those with a repayment
mortgage. With a repayment mortgage, the balance of the loan decreases over the
term of the mortgage. Therefore, the sum of cover with a decreasing term
insurance policy will also go down in line with the mortgage balance. So, the
amount for which your life is insured should match the balance outstanding on
your mortgage, which means that if you die your policy will hold sufficient
funds to pay off the remainder of the mortgage and alleviate any additional
worry to your family.

With the decreasing term insurance, the cover is usually taken out over the
term of the mortgage, and payment is made should you die during the term of the
policy. Once the policy has expired, it becomes null and void, so you will
receive nothing at the end of your policy if you are still living. There is no
surrender value on this type of cover, but it does provide a cost effective
means of protecting your home and family during the life of your mortgage.

Level term insurance

This type of mortgage life insurance cover is for those that have a repayment
mortgage, where the principle balance remains the same throughout the term of
the mortgage and the repayments made by the property owner cover the interest
payments on the mortgage only.

The sum for which the insured is covered remains the same throughout the term
of this policy, and this is because the principle balance on the mortgage also
remains the same. Therefore the sum assured is a fixed amount, which is paid
should the insured party die within the term of the policy. As with decreasing
term insurance, there is no surrender value, and should the policy end before
the insured dies no payout will be awarded and the policy becomes null and void.

Terminal illness benefit

Both of the above types of cover normally include terminal illness cover,
which means that the mortgage is cleared should you be diagnosed with a terminal
illness rather than waiting until you actually die. This helps to ensure that
you do not have the additional worry of trying to meet repayments when a
terminal illness takes away your ability to work and earn money, and at a time
when the whole family has enough to worry about without having to stress about
meeting mortgage repayments.

Critical illness cover

Critical illness cover is another type of insurance policy that can be added
on to either of the above mortgage life insurance polices and provides an extra
element of protection and peace of mind. This type of cover can also be taken
out as a stand-alone policy, but usually proves much better value if simply
added on to a main insurance policy.

With critical illness cover you will be eligible for a payout in the event
that you are diagnosed with a critical illness. If you then go on to recover
from the critical illness, the payout is yours to keep but the policy becomes
null and void following your claim. The illnesses that are covered by this type
of policy are defined by the insurer so you should ensure that you check the
terms when taking out critical illness cover.

Adding critical illness cover to your policy will only increase your
repayments by a small amount, but can provide valuable protection if you are
diagnosed as critically ill and are therefore unable to work. With your mortgage
repaid from the payout of this policy, you will not have the additional worry of
trying to keep a roof over your head at a time when you should be concentrating
on trying to make a recovery.

Summary

As indicated by the features of the two main types of mortgage Life
Insurance cover, the policy you go for will depend largely upon the
type of mortgage you have. Both types of cover offer value for money, with some
really low cost deals available. Of course, the amount that you pay will
ultimately depend upon the level of cover you require. For total peace of mind
it is always advisable to go for a policy with critical illness cover
incorporated into it.

Having some form of mortgage life cover is essential to protect your home and
your family. After working hard to buy your own property, the prospect of it
being repossessed in the event of your death can be worrying both for you and
for your family. A mortgage life cover policy will ensure that this does not
happen, and will give your family the security of knowing that whatever happens
they will still have a roof over their heads.