If you have a mortgage or are taking out a new mortgage, you might be considering whether you should opt for mortgage protection. Here, we take a look at what mortgage protection is, whether you need it, the types of protection available, and how much it costs.
What is mortgage protection?
Mortgage protection is a type of insurance that will help you to cover your mortgage payments should you find yourself in one of many circumstances. This could include redundancy, illness, or a serious injury that prevents you from working. Typically, this will cover you for 12 months or until you return to work, whichever one comes first.
If you need to make a claim, you’ll be provided with an amount each month that will enable you to pay your mortgage bill. Some policies will pay out 125% which will help you to cover additional household bills too. It’s worth noting that your mortgage protection won’t pay out straight away, so be sure to consider the exclusion period of different policies to ensure that you find the right fit for your needs.
Why should I get mortgage protection?
Your mortgage payment is likely to be one of your largest outgoings, which means that it could be difficult to cover should you find yourself out of work unexpectedly. With mortgage protection, you’ll have peace of mind that if something happened that stopped your income, you’ll still be able to make your monthly payments. Missing mortgage payments could result in you defaulting, and potentially having your property repossessed, so mortgage protection is definitely worth considering.
If you think that you’d be unable to cover your mortgage costs if you were out of work, or if you’re self-employed and not entitled to sickness or redundancy pay, mortgage protection could be especially useful.
Those who know they’d benefit from a generous redundancy package, are offered excellent sick pay, or have a health insurance policy that covers mortgage payments may not need mortgage protection. However, having a chat with an independent mortgage advisor about your needs can help to put your mind at ease.
What mortgage protection should I choose?
There are three main types of mortgage protection that you can choose from:
- Accident and sickness – Protects you if you have an accident or become sick and are unable to work. This will not cover you should you lose your job.
- Unemployment – Protects you if you lose your job. Does not protect you if you become sick or sustain an injury that prevents you from working.
- Accident, sickness, and unemployment – Protects you if you are unable to work through illness or injury, or if you lose your job. This is the most comprehensive mortgage protection option.
The best mortgage protection option for you depends on your individual needs. For example, if your employer offers great sickness pay it may be that you don’t need to be covered for sickness. Or, if you know that you’d be issued a redundancy package that would cover your mortgage payment, you may not require unemployment cover.
You can choose how much your protection covers you for, and could opt for a little over your monthly mortgage payment to help you out with other bills too. Typically, mortgage protection providers will set a monthly limit of between £1500 and £2000.
How much does mortgage protection cost?
As with most protection policies, the amount you pay each month will depend on a number of factors. Providers will consider your salary and the size of your mortgage payments when putting together your quote. The cost will also depend on the type of policy you take out, how soon you want to be covered, and the payment amount you’d like each month.
You may also find that your mortgage protection premium is higher depending on the job you have. This is because high-risk jobs, such as those in construction, could be more likely to result in an accident or injury leading to a claim.
Book an appointment with one of our independent mortgage advisors today for more advice and help with mortgage protection.