Talk to an expert Get Advice and a Quote
Talk to us

What is Mortgage Protection?

Mortgage Protection is a type of Life Insurance cover that is designed to protect your family home.

  • Secure your home for your family.
  • Stop missed payments.
  • Prevent repossession.

Usually a requirement by a bank if you have a mortgage. It will pay off your mortgage if you die.

We will find you the best cover.


  • About Mortgage Insurance
  • Cost of Mortgage Insurance

Mortgage life insurance provides coverage (also known as ‘sum assured’) for your mortgage and as you pay it off, your coverage decreases. This type of insurance is often called “decreasing term insurance.” The life insurance pay out could help your surviving family continue to afford to live in your home without financial difficulty. Of course, decreasing term insurance is valid for pay out only if the policyholder passes during the term of the coverage contract.

The benefit of mortgage life insurance is that the policyholder sets the rate and term for the policy, usually in line with mortgage payments and the end of the mortgage repayment. The decreasing term insurance will help your family stay in the home, but it will not provide additional payout to provide for living expenses, so additional coverage would need to be purchased to cover any additional needs. If that were the case, a level-term insurance policy would be appropriate to cover those expenses, as well as the mortgage.

While decreasing term/mortgage life insurance is the most affordable option, by design it is made only to provide for your mortgage after your death, with no additional benefits.

For decreasing term insurance, you pay the monthly premium, which remains the same throughout the policy, even as the payout amount is decreasing as you pay off your mortgage. In the event of your passing within the term of the policy, your beneficiaries will receive one lump sum payout. This amount is determined by the original policy coverage (sum assured), how far into the policy term the person dies, and the rate that the policy decreased.

Joint mortgage term life insurance

If two people share the responsibility of repaying a mortgage, then it might be beneficial to take out a joint mortgage life insurance policy to assure their financials in the time of the partner’s death. This joint policy will cover the two people, but will only pay out once, at the time of the first death. A joint mortgage term life policy could be the peace of mind needed by your family after your death, by providing them the financial means to maintain the mortgage repayments and secure the home.

While all of these benefits are important, it is not required to have life insurance in order to obtain a mortgage, rather it is a smart idea to protect your family, assets, and home after your death. Many mortgage companies and banks offer their own life insurance options, but with any purchase, it is important to do the research into the wide variety of options available.

Joint mortgage term life insurance is one of the more affordable options in life insurance, mostly because its cost is contingent on how much you owe on your mortgage. As with other life insurances, your age, health, and lifestyle will help determine the cost to you each month, depending on how expensive it is to insure you.

In order to determine how much coverage you need, it is important to examine your mortgage and the financial needs of your family after your death. Here are some helpful questions to help you figure out how much your policy should cover:

* How much do you have left to pay on your mortgage? If you are unsure, check your recent mortgage statement or contact your lender.

* Are there early repayment charges associated with your mortgage? Some lenders charge for repaying the mortgage early, which you can do with the payout lump sum.

Adding together the remaining repayment amount plus possible early payoff charge will give you an amount that you should purchase coverage for, allowing your family to pay off the mortgage after your death.

If this amount of coverage lends to higher monthly premiums than you’d like, you can decrease the coverage to cover the amount of mortgage repayment that will still allow your family to be stable after your death or a smaller term-life policy could be purchased. To provide funds for mortgage repayment, as well as extra money for your family’s living expenses after you death, a level-term policy might make more sense because having both a decreasing term and level-term policy together is more expensive than just purchasing one single level-term to cover costs.

Common questions

  • Is life insurance required in order to get a mortgage? aaa

    When applying for a mortgage, there are a lot of add-on fees and services that are often offered to you as the applicant. Mortgage life insurance will definitely be one of them. While this type of insurance is an excellent idea to protect your family and home in the event of your death, it is in no way legally required in order to obtain a mortgage. You also cannot be refused a mortgage if you choose to not purchase life insurance.

    The benefit of choosing mortgage life insurance is that at the time of your death, the outstanding mortgage on your home could be paid off in full, easing a potential financial burden for your family. This type of life insurance could also be used to pay off other debts after your death, such as student loans. It all comes down to providing for your family's financial security after your passing.

    There are two types of mortgage life insurance:

    • Level term: No matter when you die, the amount of the payout will remain the same, as long as the death occurs within the term of the policy.
    • Decreasing term: The payout of the policy decreases over time, as you pay down your mortgage. This policy is designed solely to cover the amount of the mortgage alone, making it less expensive, but will not cover any other expenses outside of the mortgage.

    When trying to decide between which type of life insurance is best to cover your mortgage at the time of your death, keep the needs of your monthly budget now, as well as the future needs of your family in mind. If you want a cheaper monthly premium presently, and only want to cover the mortgage repayment after your death, decreasing term is the way to go. If you want to make sure your family is provided for, as well as your mortgage, level term might be the right decision. It will cost you more in monthly premium, but will give you and your family peace of mind after your death. If you want a guaranteed payout, no matter when you die, then a whole of life policy is appropriate, though is the most expensive option.

    Once again, when finalizing your mortgage, your lender might try to sell you life insurance products that are associated with their bank or an affiliated insurance broker. While this information is helpful, it is crucial to look at a few different company offerings and compare rates to get the best deal for your situation.

  • Is there joint mortgage life insurance available? aaa

    Joint mortgage life insurance is a policy that covers two people under one policy, paying out only once, at the first partner death. This means the surviving partner will not have any coverage. This type of joint insurance is to cover the mortgage of a property that both partners contribute to and would allow for mortgage repayment after the first partner death. Alternatively, each partner contributing to the mortgage could purchase single mortgage life insurance policies.

    There are two choices for joint mortgage life insurance:

    • Level-term: The amount of payout that the surviving partner receives remains at the same level throughout the term of the policy. This type of policy could not only pay off the mortgage after a partner's death, but also provide some additional funds for living expenses. Because of this, level-term policies tend to be more expensive plans.
    • Decreasing term: The payout amount to the surviving partner decreases over time, as the mortgage is paid out. The payout will be the same as the amount of mortgage still due at the time of the first death, making it suitable for repayment mortgages. Because the payout decreases as our mortgage decreases, it is a cheaper premium per month than level-term, but will not leave any extra money for additional expenses to the surviving partner.

    This brings up an important question: should joint or single mortgage life insurance policies be purchased?

    The answer to this question will depend on the financial needs of your mortgage and your family.

    • If you only want to leave enough money to cover the mortgage payment for your partner, then a joint decreasing term makes the most sense, because buying two separate decreasing term policies would be costlier than a joint policy.
    • If you want to provide for the mortgage and additional living expenses, the difference in purchasing a level-term joint policy or a level-term single policy all comes down to the monthly premium price.
    • A joint policy will only pay out once, either decreasing term or level-term, so if the surviving partner is concerned about coverage and finances after their death, for example, if there are children, then a separate level-term policy might make the most sense, otherwise the surviving partner of the joint policy will need to purchase an all new policy at the time of the first death anyway. Having the two separate policies might save the hassle and extra burden for the surviving partner when the first death occurs.
    • Another advantage of sticking with two separate policies is that in the case of divorce, there is no need to cancel or split a joint policy since life insurance would already be separated.
    • While it may be slightly more expensive to have two separate policies to cover the mortgage, the costs are rarely much higher than a joint policy. It is important to compare rates of both to determine what will work best for your budget.
  • Does mortgage life insurance have coverage in case I am diagnosed with a critical illness?aaa

    Many lenders advise mortgage applicants to take out critical illness coverage with their life insurance. This type of policy pays out a one-time, lump sum in the event you are diagnosed with a critical illness within your policy term, as defined by the insurance company. This type of coverage is designed to help you out when you are diagnosed in order to maintain your mortgage payments in the event you are unable to work. Critical illness coverage is designed to ease your financial and emotional burdens as you struggle through a critical medical issue, such as cancer, stroke, or heart attack. There is a wide range of illness, ailments, and circumstances with which critical illness coverage can be utilized, all determined by the insurance company. If considering adding critical illness coverage, it is important to research what each company defines as critical illness, treatments, severity, and so on.

    With so many add-ons available, it is easy to think that critical illness coverage is something to skip over in a life insurance policy, but the fact is, you are more likely to be diagnosed with a critical medical issue than you are to die. This type of coverage is often expensive, so it's important to consider the following:

    • Your need for critical illness coverage: The longer you want coverage for, the more expensive your monthly premiums will be. Perhaps you will only elect to have critical illness coverage when you are paying back your mortgage or putting children through school. You can remove the critical illness coverage in the future if you no longer feel you need the additional protection.
    • The amount of coverage purchased: As with other types of life insurance, the more money you want the payout at the time of your death to be, means higher monthly premiums now.
    • There are additional coverage options for mortgage life insurance. They include:

      • Terminal illness coverage: All life insurance policies come with this coverage (some companies refer to is as 'terminal illness benefit'). This coverage pays out only when given one year (12 months) or less to live, as confirmed by a doctor. Since some critical illnesses contribute to early death, it is something to consider when thinking about taking out the extra coverage costs.
      • Serious illness coverage: This is a type of coverage is offered by certain Insurers, which offers a payout on a much larger list of conditions or disorders than critical illness. The difference with this policy is that instead of paying out the full amount of the policy coverage, the payout is different for each type of condition and the severity of the diagnosis.

Did you know ?

Getting Mortgage Cover when you’re young and in good health is the cheapest time to take out a policy. It may become more expensive and difficult to obtain the older you are, or if your circumstances change.

Factoid

If you bought Mortgage Protection Cover from your lender, it's very likely that you're paying too much: most lenders offer relatively expensive policies with poor benefits.