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Mortgage life insurance

This section is dedicated to explaining what mortgage life insurance actually is.

There are many types of life insurance available most of which can be effectively used to cover a mortgage but only one type was ever specifically designed to cover mortgages and that goes by the name of Mortgage Protection insurance or decreasing term assurance.

It should be noted that to cover a mortgage against death any policy will do as long as it pays out enough money to settle the outstanding debt at death.

The reason for mortgage protection insurance is it keeps the costs down by imitating the profile of a repayment mortgage. As the name suggests a repayment mortgage is being repaid. This means that as time goes by you owe less and less. Mortgage protection insurance exploits this fact and ensures that you have the same amount of cover as you have debt at any one time. By doing this you ensure you do not have unnecessary life cover over and above any outstanding debt. Due to this fact the overall cost of cover can be reduced versus the costs of comparable level term assurance.

In addition as the level of cover is reducing on a regular basis as a repayment mortgage would reduce, it is for this reason that it is wholly unsuitable for anything other than a repayment mortgage, as to use it in conjunction with an interest only mortgage for example would leave you grossly under insured in years to come.

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