Questions About Insuring Mortgages
- What is Mortgage Life Insurance?
- What is Life Insurance?
- I have a Repayment Mortgage. What sort of life insurance do I need?
- I have an interest only mortgage. What sort of life insurance do I need?
- How much should you insure for?
- Will my mortgage lender accept a Life Insurance policy bought online?
- Will I have to pay a fee to my mortgage lender if I don’t buy my Life Insurance through them?
- Do I have to buy my Life Insurance through my mortgage lender or mortgage broker?
- Can I include Critical Illness Insurance on my Life Insurance policy?
- Why should you consider combining Life Insurance with Critical Illness insurance?
- I want to ensure that my mortgage is paid off if I were to die or become very seriously ill and could not work again.
- What sort of life insurance do I need?
- Under a combined Life Insurance and Critical Illness policy, is the value of cover the same for both the life and critical illness provisions?
- What is Mortgage Payment Protection Insurance?
- I want to ensure that my monthly mortgage repayments are paid for me if I were off work due to sickness, accident or unemployment. What sort of insurance do I need?
- What is Level Term Insurance?
- What is Decreasing Term Insurance?
- Can I keep my Life policy on if I pay my mortgage off early?
What is Mortgage Life Insurance?
Mortgage Protection Insurance is another name for Mortgage Life Insurance.
Mortgage Life Insurance ensures that your outstanding repayment mortgage would be repaid if you died or became terminally ill. Within the insurance policy, your insurance company undertakes to send the proceeds of the policy direct to your mortgage lender.
Before you get a quotation for Mortgage Life Insurance, you will be asked whether your mortgage is a repayment mortgage or an interest only mortgage. This is because, if you have a repayment mortgage, the amount of cover you need decreases as your mortgage repayments reduce the sum outstanding to your mortgage lender. Therefore, you need a type of insurance that reduces the insurance cover in line with the sum outstanding to you mortgage lender. This is exactly what Mortgage Life Insurance does.
If you have an interest only mortgage, the sum outstanding to the mortgage provider remains unchanged as you do not repay any capital until the mortgage comes to its end. In this circumstance you need normal, level cover, life insurance.
If your mortgage has been taken out in joint names you should have a “Joint” policy (some mortgage providers will insist on this).
For mortgage purposes, “Joint” policies are always written on “first life”. This means that the policy will pay out if either of the policyholders were to die during the
Mortgage Life Insurance ensures that your outstanding repayment mortgage would be repaid if you died or became terminally ill. Within the insurance policy, your insurance company undertakes to send the proceeds of the policy direct to your mortgage lender.
Before you get a quotation for Mortgage Life Insurance, you will be asked whether your mortgage is a repayment mortgage or an interest only mortgage. This is because, if you have a repayment mortgage, the amount of cover you need decreases as your mortgage repayments reduce the sum outstanding to your mortgage lender. Therefore, you need a type of insurance that reduces the insurance cover in line with the sum outstanding to you mortgage lender. This is exactly what Mortgage Life Insurance does.
If you have an interest only mortgage, the sum outstanding to the mortgage provider remains unchanged as you do not repay any capital until the mortgage comes to its end. In this circumstance you need normal, level cover, life insurance.
If your mortgage has been taken out in joint names you should have a “Joint” policy (some mortgage providers will insist on this).
For mortgage purposes, “Joint” policies are always written on “first life”. This means that the policy will pay out if either of the policyholders were to die during the policy’s term. (Please note that once a “Joint” policy has paid out on a first death, the policy is finished – it will not pay out again if the second person were to die.)
As Mortgage Life Insurance provides steadily decreasing cover is much cheaper than Life Insurance which provides level cover.
If you want insurance that pays your monthly mortgage repayments if
you were off work through sickness, accident or unemployment, then you need Mortgage
Payment Protection Insurance.
If you want insurance that totally repays your outstanding mortgage if you became critically
ill, you need Critical Illness Insurance.
The following Frequently Asked Questions are related to the above topic. Click here if you wish to read them: -
What is Life Insurance?
What is Mortgage Payment Protection
Insurance?
Can I include Critical Illness Insurance on my Life Insurance
policy?
What is Life Insurance?
Term Insurance is another name for Life Insurance.
Life Insurance pays a lump sum to you or your family if you die or fall terminally ill whilst the policy is in force. This lump sum is free from income tax and capital gains tax.
Very few Companies will offer you a policy for less than 7 years. 20 to 25 years is the most common length of time for a policy to be in force (that is, in technical terminology, the policy’s term). Many Companies will not insure you beyond the age of 65 but a few will go to 70 and such cover is very expensive. For that reason the maximum age we will quote you for online, is 65.
All good Life Insurance policies include Terminal Insurance at no extra cost. This is a provision whereby, if you were diagnosed with an illness from which your Doctor expected you to die within 12 months of diagnosis, the policy would pay out immediately and not wait for you to pass away.
If your mortgage has been taken out in joint names you should always have a “Joint” policy (some mortgage providers will insist on this) otherwise a “Single” policy will suffice.
For mortgage protection, a “Joint” policy is always written on “first life”. This means that the policy will pay out if either of the policyholders were to die or become terminally ill during the policy’s term. (Please note that once a “Joint” policy has paid out on a first death, the policy is finished – it will not pay out again if the second person were to die.)
The other two options are Level or Decreasing cover. With Level cover, the sum insured
remains constant during the entire period the policy is in force. With Decreasing cover,
the sum insured steadily reduces during the time the policy is in force.
Decreasing cover life insurance is used, for example, to support a repayment mortgage and insurance especially designed for this purpose is called Mortgage Life Insurance.
Level cover life insurance is used to support interest only mortgages where the sum owed to the mortgage provider remains constant.
Please note that Life Insurance policies do not have any investment value. Once the policy comes to the end of its term, that’s it. The policy is finished.
There are optional extras available with a life insurance contract. We explain these to you as you enter your details but you can read more about them by clicking below.
If you want insurance to pay your monthly payments to your mortgage
lender if you were off work through sickness, accident or unemployment, then you need Mortgage
Payment Protection Insurance.
If you want insurance that totally repays your outstanding mortgage if you became critically
ill, you need Critical Illness Insurance.
The following Frequently Asked Questions are related to the above topic. Click here if you wish to read them: -
What is Mortgage Life Insurance?
What are the most common optional extras you
can have with a Life Insurance policy?
What is Mortgage Payment Protection Insurance?
I have a Repayment Mortgage. What sort of life insurance do I need?
You need Mortgage Life Insurance.
Mortgage Life Insurance ensures that the capital on your outstanding repayment mortgage would be repaid if you died or became terminally ill. All the policies we sell also include Terminal Illness cover at no extra charge. This ensures that your policy will pay out if you become terminally ill and are not expected to survive more than 12 months. Within the policy, your insurance company will undertake to send the proceeds of the policy direct to your mortgage lender.
With a repayment mortgage, the amount of cover you need decreases as your mortgage repayments reduce the sum outstanding to your mortgage lender. Therefore, your insurance policy needs to reduce the insurance cover in line with the sum outstanding to you mortgage lender. This is exactly what Mortgage Life Insurance does.
If your mortgage has been taken out in joint names you should have a “Joint” policy (almost all mortgage providers will insist on this).
For mortgage purposes, “Joint” policies are always written on “first life”. This means that the policy pays out if either of you were to die or become terminally ill during the policy’s term. (Please note that once a “Joint” policy has paid out on a first death, the policy terminated – it will not pay out again if the second person were to die.)
If you want insurance cover to pay your monthly mortgage payments if you were off work through sickness, accident or unemployment, then you need Mortgage Payment Protection Insurance.
If you want insurance that repays your outstanding mortgage capital if you became critically ill, you need Critical Illness Insurance.
The following Frequently Asked Questions are related to the above topic. Click here if you wish to read them: -
What is Mortgage Payment Protection Insurance?
What is Critical Illness Insurance?
Can I include Critical Illness Insurance on my Life Insurance
policy?
I have an interest only mortgage. What sort of life insurance do I need?
You need Mortgage Life Insurance.
You need normal, level cover, Life Insurance.
Life Insurance ensures that the full sum you borrowed on your interest only mortgage would be repaid if you died. All the policies we offer also include Terminal Illness cover free of charge. This ensures that the policy will pay out if you become terminally ill and not expected to survive more than 12 months. Within the policy, your insurance company will promise to send the proceeds of the policy direct to your mortgage lender.
With an interest only mortgage, the amount of cover you need remains constant as you do not repay any of the capital borrowed until the end of your mortgage. Therefore, your insurance policy needs to provide you with a fixed and constant sum insured. This is exactly what level cover Life Insurance does.
If your mortgage is in joint names you should have a “Joint” policy (almost all mortgage providers will insist on this).
For mortgage purposes, “Joint” policies are written as “first life”. This means that the policy pays out if either of you were to die or become terminally ill during the policy’s term. (Please note that once a “Joint” policy has paid out on a first death or terminal illness, the policy is finished – it will not pay out again if the second person were to die.)
If you need insurance that would pay your monthly mortgage payments
if you were off work through sickness, accident or unemployment, then you need Mortgage
Payment Protection Insurance.
If you need insurance that repays your outstanding mortgage capital if you became critically
ill, you need Critical Illness Insurance.
The following Frequently Asked Questions are related to the above topic. Click here if you wish to read them: -
What is Mortgage Payment Protection Insurance?
What is Critical Illness
Insurance?
Can I include Critical Illness Insurance on my Life Insurance
policy?
How much should you insure for?
For mortgage protection the initial level of life cover must always equal the capital sum outstanding on your mortgage. You should also insure for the same number of years as are remaining on your mortgage.
If you need insurance that would pay your monthly mortgage payments
if you were off work through sickness, accident or unemployment, then you need Mortgage
Payment Protection Insurance.
If you need insurance that repays your outstanding mortgage capital if you became critically
ill, you need Critical Illness Insurance.
The following Frequently Asked Questions are related to the above topic. Click here if you wish to read them: -
What is Mortgage Payment Protection Insurance?
What is Critical Illness Insurance?
Can I include Critical Illness Insurance on my Life Insurance
policy?
Will my mortgage lender accept a Mortgage Life Insurance policy bought online?
Yes they will. All the quotations we provide are from the top UK Insurance Companies – names that you are sure to recognise.
All your mortgage lender will want is evidence that your life is insured for the correct sum and term and a copy of your Acceptance letter should suffice.
The following Frequently Asked Questions are related to the above topic. Click here if
you wish to read them: -
What is Mortgage Life Insurance?
What is Life Insurance?
Will I have to pay a fee to my mortgage lender if I don’t buy
my Life Insurance through them?
Will I have to pay a fee to my mortgage lender if I don’t buy my Life Insurance through them?
No. By law they are not allowed to charge a fee.
Sometimes confusion can arise in this area because mortgage lenders are allowed to charge a fee if you don’t take out your Home Insurance through them – that is the insurance that insures the structure of your home. But as we said above, they are not allowed to charge a fee if you take out your Life Insurance independently
Do I have to buy my Life Insurance through my mortgage lender or mortgage broker?
No, you do not have to buy your Life Insurance through your mortgage lender or mortgage broker.
If you buy your Life Insurance here, you are very likely to save a considerable amount of money. You'll get your quotation in hours and then you can compare our price with the price your mortgage lender or mortgage broker has given you.
If we haven’t saved you hundreds of pounds per year we’ll eat our hat!
The following Frequently Asked Questions are related to the above topic. Click here
if you wish to read them: -
Why are the insurance prices on the Internet
so low?
Can I include Critical Illness Insurance on my Life Insurance policy?
Yes, you can include Critical Illness cover on your Life Insurance policy.
In fact it makes a great deal of sense to do so now, as it is far cheaper to combine the two rather than end up buying two separate policies.
If you have a Mortgage Life Insurance policy supporting a repayment mortgage, your life insurance automatically decreases in value as your mortgage repayments reduce the sum outstanding to your mortgage lender. If you add Critical Illness to such a policy, then the value of Critical Illness cover decreases at the same rate. The net effect is that if you were to become critically ill or die, then your combined policy would pay off the money you owed to your mortgage lender.
If you have a Life Insurance policy supporting an interest only mortgage, your sum insured remains constant and fixed at the value you applied for. If you add Critical Illness Insurance to such a policy then unless you specifically instructed otherwise, the sum insured for Critical Illness will be equal to the life insured sum. Again, the net effect is that if you were to become critically ill or die, then your combined policy would pay off the money you owed to your mortgage lender.
The following Frequently Asked Questions are related to the above topic. Click here
if you wish to read them: -
I have a Repayment Mortgage. What sort of life insurance do
I need?
I have an interest only mortgage. What sort of life insurance
do I need?
Why should you consider combining Life Insurance with Critical Illness insurance?
To answer this question you need to appreciate what each type of insurance actually gives you.
If you were to die or became so ill that your Doctor certified that he did not expect you to survive 12 months from the initial date of diagnosis*, then your Life cover would pay off the outstanding mortgage to your mortgage lender. (*the illness insurance is called Terminal Illness cover and is included free of charge in all the Life Insurance policies sold by ClickLife).
But what would happen for example, if you had a stroke or became blind? Stroke sufferers can expect to survive for many years and blindness does not affect life expectancy. So, whilst had to give up work you could not claim under your life and terminal illness cover because you were not expected to die within 12 months. These illnesses, and many others (see below), would qualify for a claim under Critical Illness cover and your mortgage would be repaid.
To put this in context, you should be aware that 1 in 5 men and 1 in 6 women suffer a critical illness before they reach normal retirement age. These risks are covered by Critical illness Insurance.
The typical types of illnesses included within Comprehensive Critical Illness insurance. Please note that the lists of qualifying illnesses do vary between insurance companies but typically they will include the following: -
Alzheimer’s disease
Aorta graft surgery
Aplastic anemia
Bacterial Meningitis
Benign brain tumour
Blindness
Cancer
Cardiomyopathy
Chronic lung disease
Coma
Coronary artery by-pass surgery
Creutzfeldt-Jakob disease
Deafness
Dementia
Heart attack
Heart valve replacement or repair
HIV or AIDs from an assault, blood transfusion, occupational duties or accident
Keyhole heart surgery
Kidney failure
Loss of independent existence
Loss of limbs
Loss of speech
Major organ transplant
Motor Neurone disease
Multiple Sclerosis
Paralysis/Paraplegia
Parkinson’s disease
Progressive Supranulcear Palsy
Stroke
Third degree burns
Total permanent disability
Cover for children
The following Frequently Asked Questions are related to the above topic. Click here
if you wish to read them: -
What is Mortgage Life Insurance?
What is Life Insurance?
What is Critical Illness
Insurance?
What is Terminal Illness
Insurance?
What is the difference
between Terminal Illness Cover and Critical Illness cover?
I want to ensure that my mortgage is paid off if I were to die or become very seriously ill and could not work again. What sort of life insurance do I need?
You need either Life Insurance if you have an interest only mortgage, or Mortgage Life Insurance if you have a repayment mortgage. Then you need to add Critical Illness insurance. You can do this all in one policy.
If you take out these two insurances as separate policies the insurance will cost you a lot more - so make sure you get a combined policy.
The following Frequently Asked Questions are related to the above topic. Click here if you wish to read them: -
What is Mortgage Life Insurance?
What is Life Insurance?
What is Critical Illness
Insurance?
Why should you consider combining Life Insurance with Critical
Illness insurance?
Under a combined Life Insurance and Critical Illness policy, is the value of cover the same for both the life and critical illness provisions?
Yes, they will be the same - unless you have specifically instructed that the sums insured should be different.
If you have a Mortgage Life Insurance policy supporting a repayment mortgage, your life insurance automatically decreases in value as your mortgage repayments reduce the sum outstanding to your mortgage lender - and the value of Critical Illness cover decreases at the same rate. Therefore, if you were to become critically ill or die, then your combined policy would pay off the money you owed to your mortgage lender.
If you have a Life Insurance policy supporting an interest only mortgage, your sum insured remains constant and fixed at the value you applied for – and the sum insured for Critical Illness will be the same. Again, the effect is that if you were to become critically ill or die, then your combined policy would pay off your outstanding mortgage.
The following Frequently Asked Question is related to the above topic. Click here if
you wish to read it: -
Why should you consider combining Life Insurance with Critical
Illness insurance?
What is Mortgage Payment Protection Insurance?
Mortgage Payment Protection Insurance will pay your monthly mortgage repayment if you were off work due to accident, sickness, or unemployment (Don’t forget that your home is at risk if you fail to keep up the repayment of loans secured against it.) Basically, Mortgage Payment Protection Insurance is designed to remove the worry of whether you could afford your mortgage repayments if you were off work.
These policies require you to have been off work for a minimum number of days before you can claim and this is known as the “qualifying period”. It is usually 28 days or a month. With some Mortgage Payment Protection policies the mortgage payments will start after the qualifying period but the better policies will backdate payments to the day you started to be off work.
Once you have started to claim, the policy will continue to pay your mortgage until you are either back at work or have reached the maximum number of months the policy will pay (typically 12 months), which ever arrives soonest.
The Mortgage Payment Protection policies offered through this website give you the option of insuring yourself for just accident and sickness, or just unemployment, or all three. The premiums are relatively modest so as long as you can afford them, and bearing in mind the importance of keeping up your mortgage repayments, most people insure themselves for all three.
I want to ensure that my monthly mortgage repayments are paid for me if I were off work due to sickness, accident or unemployment. What sort of insurance do I need?
You need Mortgage Payment Protection Insurance.
Mortgage Payment Protection Insurance is designed to remove the worry of whether you could afford your mortgage repayments if you were off work due to accident, sickness or unemployment. (Don’t forget that your home is at risk if you fail to keep up the repayment of loans secured against it.)
With a Mortgage Payment Protection policy you need to have been off work for a minimum number of days before you can claim. This is known as the “qualifying period” and it is usually 28 days or a month. With some policies the mortgage payments will start after the qualifying period but the better policies will backdate your payments to the day you started to be off work.
Once you have started to claim, the insurance will continue to pay your mortgage until you are either back at work or have reached the maximum number of months the policy will pay (typically 12 months), which ever arrives soonest.
The Mortgage Payment Protection policies offered through this website give you the option of insuring yourself for just accident and sickness, or just unemployment, or all three. As the premiums are relatively modest, and bearing in mind the importance of keeping up your mortgage repayments, most people insure themselves for all three.
What is Level Term Insurance?
Level Term Insurance is actually another name for the standard form of Life Insurance.
Level Term Life Insurance is the type of insurance that pays a tax-free lump sum to you or your family if you die whilst the policy is in force. The important point is that, on this type of policy, the sum insured remains the constant (i.e. level) whilst the policy is in force.
Level Term Insurance is used for supporting interest only mortgages where the sum owed to the mortgage lender remains constant. It is also used for many family protection situations. (If you have a repayment mortgage where your monthly mortgage payments pay the interest and, ultimately, all the money you borrowed, then you need Mortgage Life Insurance.)
It is important to note that a Level Term Insurance policy never has any investment value. If you are looking for a policy that has an element of investment within it, you want Life Assurance as opposed to Life Insurance.
The following Frequently Asked Questions are related to the above topic. Click here if you wish to read them: -
I have a Repayment Mortgage. What sort of life insurance do
I need?
I have an interest only mortgage. What sort of life insurance
do I need?
What is Decreasing Term Insurance?
If you had Decreasing Term Insurance and were to die whilst the policy was in force, the insurance company would pay out a tax-free lump sum. The important point is that, on this type of policy, the sum insured steadily reduces from the value initially insured on day one, down to nothing on the date the policy terminates.
Decreasing Term Insurance is primarily used for insuring repayment mortgages where the capital owed to the mortgage lender steadily reduces as your monthly mortgage payments pay the interest and, ultimately, all the money you borrowed.
When the Decreasing Term Insurance is used for mortgage purposes, most insurance companies call the policy “Mortgage Life Insurance”. They also provide for any payout to go automatically to your mortgage lender thus paying off your mortgage.
Decreasing Term Insurance is sometimes known as Low Cost Life Insurance as it is the cheapest form of life insurance.
If you have an interest only mortgage where the sum owed to the mortgage lender remains fixed and constant, you will need normal Life Insurance (normal Life Insurance is also known as Level Term Insurance). In the context of a mortgage, this type of insurance pays a fixed tax-free lump sum to your mortgage lender if you die or fall terminally ill whilst the policy is in force. The important point is that the sum insured remains constant (i.e. level) whilst the policy is in force.
Level Term Insurance is also used for many family protection situations.
Please note that neither Decreasing Term Insurance nor Level Term Insurance ever has any investment value. If you are looking for a policy that has an element of investment within it, you want Life Assurance as opposed to Life Insurance.
The following Frequently Asked Questions are related to the above topic. Click here if you wish to read them: -
I have a Repayment Mortgage. What sort of life insurance do
I need?
I have an interest only mortgage. What sort of life insurance
do I need?
What is the difference between Life
Assurance and Life Insurance?
Can I keep your Life policy on if I pay my mortgage off early?
Yes, you can keep my Life policy if you pay your mortgage off early.
As far as the insurance company is concerned, as long as you pay the premiums, you remain insured.
Whilst many people decide to keep on a normal Life Insurance policy, fewer decide to maintain a Mortgage Life Insurance policy. This is because with Mortgage Life Insurance policy, the sum insured is steadily decreasing and towards the end of the policy’s term, the sum insured may be very low and hardly worth keeping on.
If you are retaining a policy that previously supported a mortgage, you should inform your insurance company that your ex-mortgage lender now had no interest in the policy so that, in the event of a pay out, the money would go to your family.
The following Frequently Asked Questions are related to the above topic. Click
here if you wish to read them: -
What is Mortgage Life Insurance?
What is Life Insurance?
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