Mortgage life assurance aims to make sure your dependents don't need to pay off any mortgage in the event of your death by covering the remaining debt if you die within a specific time.
Do I need mortgage life assurance?
When you take out a mortgage it is advisable to think about covering repayments with mortgage life assurance, especially if you have dependants who would be financially impacted by your death. Remember though that, because your mortgage debt goes down the amount of cover you need and therefore the sum paid out by mortgage life assurance will also decrease. So, you may want to think about level term assurance which will guarantee a fixed lump sum payout.
How much will it cost?
As with any type of insurance, the policy will be more expensive the more cover is required. So a bigger policy taken over a longer period will cost more. Premiums will also be determined by age, your job and your smoking habits. You should go back for a re-quote if you give up smoking for a year or more as this could significantly cut your premiums.
Other lifestyle factors like general health and any dangerous sports you do may also be taken into account.
The younger you are the fitter and healthier, and the lower risk lifestyle you follow, the lower your premiums will be.
As mortgage life assurance doesn't have any investment component, you'll probably just want to go for the cheapest option you can get. What is writing a policy in trust?
In the event of your death any payout will form part of your estate and therefore potentially subject to inheritance tax. But if you make sure that the policy is written in trust, your dependants will receive the proceeds directly and won't have to pay inheritance tax. Your policy should include this option and facility and there should not be any additional charge.
Mortgage life assurance policies won't have any cash in value and end when the policy's term ends or if premiums are not paid.
The Financial Conduct Authority does not regulate inheritance tax planning and trusts.
Please be aware that if you fail to maintain mortgage payments your home is at risk of being repossessed.
Related ArticlesWhat is Level Term Assurance? | What Is Whole of Life Assurance? | Beginner's Guide to Protecting your Future | What is Critical Illness Cover? | What is Income Protection Insurance?
This article (What Is Mortgage Life Assurance?) is intended to provide a general appreciation of the topic and it is not advice.
For more information please contact Nurture Financial Planning Ltd on 01603 673502 or email firstname.lastname@example.org and we will be happy to assist you.
Article expiry: 05 Apr 2018