If you have a Repayment Mortgage and want insurance cover for the mortgage alone,
then mortgage life insurance is what you need.
Mortgage life insurance is not appropriate if you want to cover an Interest Only
Mortgage, for this you need level term life insurance.
Mortgage life insurance is a form of insurance specially tailored to work with a
Repayment Mortgage and is designed so that your sum insured decreases in line with
the decreasing capital owed on your mortgage. So if you died, the sum insured should
be exactly the same as your repayment mortgage.
This decreasing cover reduces the cost of this type of policy, and for this reason
Mortgage life insurance is sometimes known as low cost life insurance.
Terminal Illness cover is also included in most Mortgage life insurance policies,
so your mortgage will also be paid off if you are diagnosed with an illness from which
a Doctor expects you to die within 12 months of diagnosis.
If you take out Joint Mortgage life insurance, be aware that all policies associated
with mortgages are written on a first life basis. This means that the policy will
pay out if either one of the policyholder's were to die before the end of the policy's
term, and then the policy automatically terminates.
If your mortgage is held jointly then you do have to insure both mortgage holders.
If you're also interested in protection to cover your monthly mortgage payments if
you are unable to work due to illness, accident or unemployment - look at Mortgage
Payment Protection Insurance.
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