Nobody likes to think about bad things happening to them, so it should probably not be a surprise that many people fail to take out protection insurance that would help them or their family in the case of accident, illness or death.
When people consider this kind of cover they typically look to life insurance, but cover that can protect you if you have an accident, or fall ill, is also an important thing to consider.
What Is Mortgage Life Assurance?
Mortgage Life Assurance is designed to pay off the remaining mortgage debt on repayment mortgages and interest only mortgages if you die within a set period. It helps to ensure that your dependants needn’t worry about repaying the mortgage if you die.
Is it worth having?
It is sensible to consider cover when you take out a mortgage. It can be useful protection if you have a repayment mortgage or interest only mortgage, and people who are financially dependent on you.
How Much Does It Cost?
Mortgage Life Insurance has no investment element as the payment covers the balance of the mortgage. So it’s usually a simple case of the cheaper the better. It is usually necessary to review the cover when moving home, or taking on additional borrowing on your mortgage.
Costs depend on you
Policy costs increase with mortgage size and length as well as the likelihood of your death during the term. This means age and whether you smoke are big factors. For those who’ve quit smoking, once a year has passed, it is worth a re-quote as the price may have reduced substantially.
Again if you already have a policy and you have stopped smoking ask us for a re-quote as we may be able to find cheaper cover for you. Some Mortgage Life Insurance policies also factor in health, occupation and participation in risky sports. So a 21 year old, non smoking office worker, who enjoys healthy food and regularly visits the gym, will probably find their policy could have monthly premiums that cost less than they would for someone who is older and leads a less healthy lifestyle.
Consider writing in trust
If you die the life assurance payment will then form part of your estate. This may make the value of your estate liable to Inheritance Tax. In many cases you can avoid this by writing the policy in trust – which means the payment goes direct to the trustees for payment to your chosen beneficiaries, avoiding inheritance tax. This is relatively easy to do as with most insurance policies they include the option (and papers) for writing in trust directly, at no extra charge.
These types of plan will have no cash in value at any time, and will cease at the end of the term. If premiums are not maintained, then cover will lapse.
Inheritance Tax Planning and Trusts are not regulated by the Financial Conduct Authority (FCA).
Your home may be repossessed if you do not keep up repayments on your mortgage.
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