Both life insurance and mortgage life insurance are intended to provide a cash pay out in the event that you pass away within the term of the policy. Your loved ones can utilise any type of insurance to aid in mortgage repayment.
Because they were designed with different degrees of protection in mind, life insurance and mortgage life insurance differ primarily in this way. Some people want a policy that, if they die away during the policy’s term, will financially support their family in a number of ways, including paying for household bills and educational costs. Others could need insurance that would only help their family keep their mortgage protected in the worst-case scenario.
Because every person’s situation is different, you should carefully consider all of your options. This is a description of the policies we offer and the things they are meant to help you safeguard.
If you pass away while the policy is in force, life insurance, also referred to as level term life insurance, might give you a cash payout. It could be used to maintain your family’s standard of life or to help pay for an interest-only mortgage. The rates and level of coverage you choose stay the same up until you make changes to your policy.
A repayment mortgage is protected by decreasing term life insurance, also referred to as “decreasing mortgage life insurance.” As a result, the coverage amount decreases generally in line with the mortgage’s payments value.
Please remember that life insurance is not a savings or investment product and has no cash value unless a valid claim is made.
How does life insurance for a mortgage pay out?
One significant difference between life insurance and mortgage life insurance is how the level of coverage operates during the lifetime of the policy.
Your level of protection is assured to remain the same if you carry life insurance throughout the course of any valid claims that might be made.
In contrast, the potential pay out from mortgage life insurance to cover a repayment mortgage reduces over time. If the original cover amount was the same, a legitimate claim from a mortgage protection policy could result in a pay out, but it would probably be less than it would be for a level term policy.
Pros & Cons of mortgage life insurance
It’s not necessary for everyone to buy mortgage life insurance. Although normal life insurance isn’t exclusively for homeowners, you might want to consider buying one if you rent or have an interest-only mortgage. However, some people would like a life insurance policy so they can cover these costs and have the security of knowing exactly how much a pay out would provide if they had additional expenses (such as paying for a child’s school or their hobbies).
Yet, there are several benefits to purchasing life insurance for mortgage protection:
Is mortgage life insurance cheaper than level term life insurance?
Indeed, mortgage life insurance is frequently less expensive than life insurance. This is so that the potential pay out is less than fixed life insurance because the quantity of cover reduces with time. Yet, a number of factors, such as your age, general health, smoking status, and alcohol usage, impact life insurance premiums and whether you are eligible for a coverage at all.
Which life insurance policy is right for me?
When deciding what kind of life insurance policy you might require, take into account who and what you are seeking to protect. If you have children or need to protect more than just your mortgage, a level cover life insurance policy may give you the depth of protection you require. Yet, if you have a repayment mortgage and want to keep your monthly expenses low, a “decreasing” life insurance policy for mortgage protection can be an affordable and tempting option.
Every household has different needs, but as a general rule, you might want to consider purchasing life insurance of some kind if your partner, kids, or other family members depend on your income.
Can you claim benefits if you have income protection insurance?
In short, yes. Having income protection insurance doesn’t affect your right to claim SSP. Statutory Sick Pay can be claimed alongside your income protection insurance policy and helps to give you a little more financial stability while you ready yourself to return to work.
Are there other life insurance options?
Yes. While we’ve been comparing the differences between life insurance and mortgage life insurance, there are other policies that can protect you and your loved ones:
You should speak to our experts here at Daddy Insurance who will help you determine the best policy for your needs.
Regardless of what type of policy you chose, taking out a life insurance policy can help provide financial security to your loved ones should the worst happen.
Critical Illness Cover
Simply stated, critical illness insurance pays out a set amount if you are discovered to have one of the serious conditions it covers. The majority of critical illness insurance policies often cover critical illnesses like cancer, heart attacks, and stroke.
As many critical illness policies are bundled with life insurance, you can choose the level of protection you want and the length of the policy, though you can also get critical illness insurance on its own.
Being worrying about money during a life-threatening medical emergency is the absolute last thing you want. But getting sick can be expensive. You could need to pay for particular medical expenses or lifestyle changes, and if you are unable to work, it could have a detrimental effect on your family’s financial situation. Here, critical sickness coverage comes into action and offers assistance when you most need it.
Income Protection Insurance
Income protection insurance should be considered if you work a job where you run the danger of losing a portion of their income for reasons beyond your control. This will provide you peace of mind about your income.
Loss of income might be concerning, particularly if you have several ongoing expenses. Income protection insurance is available to support you financially until your problem is rectified if you experience a loss of income because of illness or injury. It can help you with bills, rent or mortgage payments, and other expenses.
Compare Life Insurance, Critical Illness Cover & Income Protection with Daddy Insurance
Daddy Insurance can offer prices from the UK’s top insurers for life insurance, critical illness cover, income protection & more. Our team of experts can support and guide you through the process with our advised service to help get you the right policy that suits your needs the most.