Getting on the property ladder
Dom Beer and Chris Beer
When you are investing in property using a mortgage, you plan for your income to cover the monthly repayments; however, if for whatever reason your income dramatically drops and you cannot meet the repayments, mortgage protection insurance is there to offer protection.
Mortgage protection insurance allows you to avoid defaulting on your mortgage, which would ultimately mean you would lose your home.
We will be delving into whether or not mortgage protection insurance is for you, or if in fact there may be more suitable choices for your specific situation.
Understanding mortgage protection insurance
Mortgage protection insurance, also know as mortgage payment protection insurance (MPPI), is a type of insurance policy that helps you to keep making monthly payments in the event of not being able to work due to an injury or illness, or if you have been made redundant.
There is a waiting period before your insurance will pay out each month, which can differ from policy to policy but usually ranges between 30 to 60 days. Also, depending on your policy, you may be able to get additional assistance with payments being 125% of your mortgage to allow you to cover other monthly bills.
Please note that there is often a limit on the number of payments normally ranging between one or two years. It is also worth noting that PPI and mortgage protection insurance are not the same. If you are wanting to find out more then contact our team today for unbiased insurance advice Devon.
What does mortgage protection insurance cost?
The amount the insurance premium costs will normally be at £20-25 per month; however, it is possible that your monthly payments can be as low as £10 or as high as £40.
Insurers will take into account a range of different factors to decide your premium cost, which will include your monthly income, your age, your occupation, and how much your mortgage costs you each month. Different factors can increase the monthly cost, including working in manual labour where injury is more likely.
If you want to get better levels of cover then you will have a higher premium. Also, you want to reduce the waiting period, or increase the reasons for being unable to work, you will most likely need to pay more.
There are also insurance policies known as “back-to-day one”, which instead of providing assistance from the claim date will in fact provide cover from the day that you stop working. Our team of advisors are on hand to offer insurance advice to Devon and the rest of the South West, including on back-to-day one insurance.
Choosing the best type of mortgage protection insurance for you
Mortgage protection insurance can be split into three main types:
Accident and sickness - If you are unable to work due a serious illness or injury, the policy will offer cover.
Unemployment – If you are made redundant then this type of policy will offer cover.
Combined – Offers cover in both the events of redundancy and injury/illness.
In the event that you are applying for mortgage protection insurance as a self-employed worker, there are still providers who will offer cover but these will be more specialist policies. Our team of friendly advisors at Beerstone are able to offer tailored insurance advice throughout Devon to self-employed workers so finding cover for your specific situation.
How essential is mortgage protection insurance?
Although mortgage protection insurance is not obligatory, you should consider what you would do without the insurance in the event of you being out of work for an extended duration.
There are other options to mortgage protection insurance that you may want to consider instead but it is always worthwhile speaking to our team for friendly insurance advice for Devon. The alternatives may in fact offer better coverage than mortgage protection insurance so it is always worthwhile comparing your options.
As with any type of insurance, pre-existing health conditions may not be covered. You may also be required to take part in a medical assessment to determine if you have any medical issues.
Other options include:
Critical illness cover
Life Insurance
Income Protection
The alternatives: Critical illness cover
In the event that you become seriously ill and are no longer able to work because of it, critical illness cover will pay out a single lump sum. It is worth noting that not all illnesses will be covered, and it will also not offer any cover in the event of being made redundant or becoming injured.
Critical illness cover is normally offered with life insurance. Our team at Beerstone will be able to offer Devon insurance advice that will help find critical illness cover that is paired with life insurance that perfectly fits your lifestyle.
The alternatives: Life insurance
Many lenders will expect you to take out life insurance if taking out a joint mortgage.
Life insurance will offer cover in the possible event of your death, so whoever is sharing the mortgage with you, and your other dependents will be financially supported.
As your mortgage reduces over time through monthly payments, the life insurance policy will reduce in both terms of cover and premiums. This is known as a decreasing life insurance.
When taking out a mortgage, it may be worth having both life insurance and mortgage protection insurance, or both life insurance and income protection insurance. This is due to life insurance not offering any cover in the event of being made unemployed.
The alternatives: Income protection
Compared to mortgage protection insurance, income protection offers far better cover in the event of being made redundant or unemployed.
Income protection will cover a percentage of your salary, rather than being based on your mortgage payments. Also, income protection will also normally exceed the maximum two-year limit of payments seen with mortgage protection.
The income protection insurance premiums will be higher, but in many situations, it can be a worthwhile compromise. Income protection could even potentially pay all the way up to your retirement date or whenever you happen to return to work. It is certainly worth considering if you have a high-risk of injury, such as working on a building site.
Applying for mortgage insurance
When it comes to choosing the best insurance, it is worthwhile speaking with a mortgage advisor. Everyone’s situation is different. What works for one person may be completely wrong for the next.
At Beerstone, we are able to offer expert insurance advice for Devon and the local surrounding areas to find you insurance that works for you.
We can outline the options available to you in terms of price and cover so we can find you a policy that fits your situation.
We can also help with:
Ready to get started?
Speak to our mortgage advisors today to discover the various options available to you in terms of insurance for your mortgage.
Over the years, our mortgage advisors have helped hundreds of customers across Devon in areas such as Exeter, Ottery St Mary, Crediton, Sidmouth, Exmouth, Cranbrook and Cullompton to name but a few.
Your home/property may be repossessed if you do not keep up repayments on your mortgage.
About Beerstone
Beerstone Financial Services was established in 1996 by Chris Beer, our Founding Director, who still plays a key role in the company and ensures we maintain the best service.
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Beerstone Financial Services was established in 1996 by Chris Beer, our Director, who still oversees the company and ensures we maintain the best service.
In total we have over 30 years of experience in financial services working in a range of environments so you can be sure that your situation is in experienced hands.
Speak to our team
Visit our offices: 2 Southernhay West, Exeter, EX1 1JG
Beerstone Financial Services Ltd (542704) is an Appointed Representative of BrokerSync Ltd, which is authorised and regulated by the Financial Conduct Authority (1031981).
There may be a fee for Mortgage Advice. The precise amount will depend upon your circumstances and will be agreed upon following your initial meeting.
Investments, Pensions, Wills, Trusts, PMI and Estate Planning will be referred to our authorised third-party providers. Beerstone Financial Services Ltd and BrokerSync Ltd are not responsible for any advice received from the third-party providers.
Investments, Pensions, Wills, Trusts, PMI and Estate Planning will be referred to our authorised third-party providers. ABC Ltd and BrokerSync Ltd are not responsible for any advice received from the third-party providers.
YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE.
Conveyancing, Wills, and some forms of Buy-to-let Mortgages and Commercial Mortgages are not regulated by the Financial Conduct Authority.
Think carefully before securing other debts against your home. Your home may be repossessed if you do not keep up repayments on a mortgage or other debt secured against it.'