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Do you need mortgage protection insurance?

What would happen if, due to unforeseen circumstances, you found yourself unable to meet your mortgage repayments? 

Enter the realm of mortgage protection insurance—a cover designed specifically to offer that peace of mind. Here’s what it is, how it operates, and when it can come in handy.

How does it work?

At its core, mortgage protection insurance is designed to cover your mortgage repayments if you're unable to do so due to interruptions to your income because of situations like illness or injury. 

Once you've taken out a policy, if you find yourself in a situation covered by the insurance, claim payments will be paid monthly, after the end of the wait period. The length of time it will cover these payments varies by policy, so it’s essential to understand the specifics. You can choose how much cover you need (usually up to a maximum of 110% of your mortgage payments), the wait period (the amount of time you need to wait before you start receiving the payments), and the payment period (how long the payments will be made for while you remain off work due to the illness or injury). 

When is mortgage protection cover beneficial?

It largely depends on your needs, but here are some common scenarios:

  • First-home buyers: If you just bought your home, you know this well: venturing into homeownership for the first time can be an exciting but also nerve-wracking experience. With mortgage protection insurance, new homeowners can alleviate some of their concerns around unexpected events impacting on their ability to make repayments on their newly acquired debt. 

  • Families: For households where the loss of income from one family member, especially the primary breadwinner, would lead to financial strain, this insurance can provide a buffer.

  • Individuals without significant savings: If you don't have a hefty emergency fund tucked away, the insurance can serve as a safety net, helping you to continue making your mortgage repayments. 

Mortgage protection vs income protection

While both mortgage protection and income protection insurance provide financial security in challenging times, they operate a bit differently. Income protection is broader, replacing up to 75% of your gross pre-disability income if you're unable to work. It could cover not just your mortgage but other living expenses too.

On the other hand, mortgage protection is more specialised. The amount of cover you can take out is based on the amount you need to cover your mortgage repayments. It's a good idea to weigh the costs and benefits of each type of cover and consider them in the context of your broader financial situation.

Like to know more?

While hoping for the best in life, it's prudent to prepare for the unexpected. Mortgage protection insurance offers a layer of security, ensuring your home remains in your hands even if your income stops. 

As with any insurance, it's essential to read the fine print, understand the terms, and seek advice to choose the policy that fits your unique needs. So if you’d like to know more, get in touch: we’re here to help. 

Disclaimer: Please note that the content provided in this article is intended as an overview and as general information only. While care is taken to ensure accuracy and reliability, the information provided is subject to continuous change and may not reflect current developments or address your situation. Before making any decisions based on the information provided in this article, please use your discretion and seek independent guidance.