Most people with a mortgage have at some point found themselves worrying about it in the middle of the night. It’s a big commitment, especially when you have a family who need safety and security.
People are often concerned about how they would pay the mortgage if something were to stop them working for a while. Perhaps you or your partner could lose their job, or worse, be unable to work through illness or being injured in an accident.
It’s not a nice thing to think about, but you could find reassurance by buying mortgage protection insurance. You can choose whether you would want to be covered just for unemployment, or if you would also want cover for illness or accidents preventing you from working. Note that if you work for a company, it might already provide some accident/illness cover.
How mortgage protection could help you
Here’s how it works. If you have bought mortgage protection insurance and you lose your job, you’ll be paid a tax-free monthly amount to cover your mortgage, which starts after a pre-agreed waiting period. The longer this period is, the lower your premium, so it’s worth working out how much redundancy pay you could potentially receive from work, to see how long you could last before the insurance would be needed.
If you have chosen accident, sickness and unemployment cover, you are likely to have higher monthly payments than with unemployment only, but you will receive a payout if you have an accident or an illness that means you are unable to work for a certain period of time. Again, there is a waiting period with this kind of policy.
With mortgage protection, there is usually a limit, such as £1,500 or £2,000 per month, so if you have a very large mortgage there could still be a gap. Also, most polices only pay out for up to 12 months, and some may only pay out for as little as three months.
The good news is that it’s easy to compare the different levels of cover and the prices with comparethemarket.com. Just start a quote by filling in your details and the kind of cover you are interested in. It only takes about a minute or two. We will ask whether you specifically want to cover yourself for your mortgage, or loan repayments, your rent or your overall income.
You then put in the details of the mortgage, and choose which type of insurance you want to compare – unemployment only or the extended cover. You’ll then see a page listing all the quotes in price order, with the cheapest at the top. You can also click different tabs to view the different kinds of cover and how much they would cost.
Make sure you look at all the details of the policy, not just the price, as they will differ in what they do and don’t cover, the waiting period and other features. You can also call to speak to an expert if you have any queries.
Once you have chosen the right cover for you, you can click to go to the insurer’s website and buy the policy. Again make sure you read all the details.
Do you need life insurance?
Many people that buy unemployment insurance also buy life insurance. This is designed to provide a large sum of money to your partner and/or children if you were to die. A lot of people buy life cover to provide enough money to pay off the mortgage, so that their family won’t have the worry of paying for their home when they aren’t around anymore.
The funds could also be used for funeral costs, debts or support in some other way.
Reasons why people buy life cover
There are a few trigger points in life that might make a person think about buying a life policy. Buying a home is one of these, as could mean that your partner or family could inherit a mortgage free home.
Another is getting married or settling down with a partner. A third is starting a family. When there are important people in your life, it’s a good idea to think about what they would need if you weren’t around to provide for them.
So it can be a pretty important cover to have in place and could mean a great deal to the people left behind if you were to die.
With comparethemarket.com it’s easy to compare life insurance. It only takes on average about three minutes (we’ve timed it!) to get to a list of life insurance quotes tailored to you.
Life cover options
First you need to decide whether you want to look at single cover or joint life insurance. With joint cover you may pay a little more, but you will get a payout upon the death of either of the insured people on the policy. However, this type of policy would then end once it’s paid out once, and you would need to buy a new policy for the remaining person if they wanted to be covered afterwards.
Next you need to set a time limit on the cover – enter the number of years you want it to last. This might match up with the amount of time left on your mortgage, or when you think your children may be independent and no longer need your financial support.
Then you just need to tell us whether you have smoked or used anything containing nicotine in the last 12 months. Because of the health risks linked with smoking, insurers usually charge more for a smoker’s policy.
Next you’ll see a page listing every life insurance quote from the providers that can cover you, in price order with the cheapest life insurance at the top. Remember, cheap life insurance isn’t necessarily the best life insurance, so do read the details carefully before you buy.