Mortgage Insurance

Mortgage repayments and your property with insurance may sometimes feel like unnecessary extra payments for you, but it could save you a huge amount of money and worry in the future. There are different types of insurance and mortgage related products on the market. The three major ones are:

1)Mortgage Payment Protection Insurance (MPPI)

This insurance covers your mortgage payments if you are unable to work due to an accident, sickness or with some policies, if you are made unemployed. The policy that covers all three eventualities, is called ASU cover.

You can choose what level of cover you want among the variety of options available. Remember to check all the small print before committing to a policy, as all insurance has cover restrictions. E.g. A pre-existing medical condition is likely to prevent you being able to claim for that condition if it reoccurs. Most insurance policies have an initial exclusion period of between 30 and 60 days before you can claim and you may have to continue to pay premiums while you are claiming.

2) Life Insurance

Life insurance is about providing financial protection in the event that you die early and you have dependents that rely on your earnings. There are three main types of life insurance: Term insurance, whole life insurance & endowment insurance.

Term insurance - When buying a property most borrowers choose decreasing term assurance - the sum insured, normally the balance of your mortgage, reduces by a fixed amount each year, decreasing to nil at the end of the term. The premium will stay the same and the policies are used to cover a mortgage or other loan given that they pay an outstanding balance of the debt if you die early.

3) Buildings & contents insurance

If you have a mortgage, your lender will insist that your property is protected by buildings insurance. It will pay out, if your property is destroyed by fire, floods or subsidence or for damages to fixed fittings, including baths and kitchens as well as sheds, greenhouses and garages.

If you buy a leasehold property, ie.a flat in a block of flats, the freeholder will arrange buildings insurance for the whole block. In this case you may not need your own buildings policy. You may choose to have contents insurance added to your buildings insurance policy or a separate contents insurance policy which financially protects the contents of your home and personal possessions.

There are different building and contents insurance policies that are complex as to what is covered under different circumstances. If you Shop around, you will be able to get a better deal by contacting an independent mortgage adviser who can choose a policy best suited to your circumstances.