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Protection

Protection is there to help when you need it.

Looking after my investment

So you have now secured your mortgage and have the perfect home so it’s time to relax right?  No, unfortunately it isn’t.  Remember what happens if you don’t make your mortgage payments – your home is repossessed.  You might think that it’s never going to happen but what happens if you have an accident that means you can’t work?  Or if the worst happens and one of you dies?  How do you then pay that mortgage?

Protection from Mortgages with Marie Williams

A lot of us like to think that these things won’t happen but the chances of them are happening are unfortunately higher than we would like to admit.  This is when insurance comes to our aid.  Insurance is one of those products that we don’t want to need and certainly don’t want to use but it really does help when it is needed. 

Unfortunately insurance products vary across the market – a critical illness policy from one provider is not exactly the same as a critical illness policy from another provider.  They will have different definitions of illnesses, have different claims experiences etc so it’s important to choose a provider with a good claims history and a comprehensive policy that covers you and your needs.

What type of insurance products can help me?

Income Protection

Income protection provides you with regular payments that replace a percentage of your income if you are unable to work due to illness or accident.  The policy will pay out until you can start working again, or until you retire, die or reach the end of the policy term. 

Most income protection policies have a deferred period.  This is the period of time between you not being able to work and before the policy starts making payments.  This allows for the fact that most employers will pay sick pay for a certain level of time.  The longer the deferred period, the cheaper the monthly payments are.

Critical Illness

Critical illness cover is a type of life insurance policy that offers protection in the event of a serious illness or injury.

You will receive a tax-free lump sum if you are diagnosed with an illness that meets the definitions in your policy. This can then be used to pay off your mortgage, or it may help to pay for any necessary adaptions to your house and changes to your life following the illness. 

But policies from different providers are not the same, so it’s important to review the definition of illnesses covered. For example, 1 in 2 of us will get cancer at some point in our life.  Policies typically define the level of severity of cancer required before the policy will pay out and these definitions can vary between providers. 

Life Insurance

Term life insurance is one that runs for a term, which is why it is the right product to match a mortgage by setting the term of the life insurance to align with the term of the mortgage.  There are two different types for a mortgage: firstly a decreasing term which aligns to a repayment mortgage, where the amount of life insurance cover decreases broadly in line with that of the capital reduction in the repayment mortgage, and secondly a level term which maintains cover at a fixed amount, similar to the fact that capital remains the same for an interest-only mortgage and doesn’t decrease over time.

It is possible to take out a term insurance policy that exceeds that of your mortgage value, to allow for the fact that there may be additional costs following a death which means that a higher level of cover is required, e.g. the death of the primary child care provider may require a partner to reduce their hours or change their job to pick up additional child-caring responsibilities.

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