Mortgage Insurance

When most people talk about mortgage insurance they are referring to a life insurance policy, and for most people the first time they consider taking out a life insurance policy is when they apply for a mortgage.

Although not always compulsory, most lenders will strongly recommend that you take out mortgage insurance to protect your dependants should the worst happen.

Mortgage insurance will pay out a capital lump sum to your dependants if you die during the term of the policy, unfortunately if the policy runs its term and you do not make a claim, you will receive no payment from it.

The two most common forms of mortgage insurance that can be taken out by individuals or couples are:

Decreasing Term:The amount the policy pays out reduces each year in line with the reducing balance on your outstanding mortgage; this type of policy is taken out with a repayment (capital and interest) mortgage.

Level Term: The policy payout remains the same during the entire term of the policy, and is designed to run alongside an interest only mortgage, where the balance remains the same during the mortgage term.

There are a number of option extras you can take out with your mortgage insurance policy, such as critical illness, and permanent health insurance.