Mortgage protection insurance is an insurance policy that pays off your mortgage if you or another policy holder dies during the term of the mortgage. If you have a joint mortgage, both people need mortgage protection insurance. It runs for the same length of time as your mortgage. So, if you take out a mortgage over 20 years, your mortgage protection insurance must also be in place for 20 years.
Types of Mortgage Protection
Reducing Term Cover: As you pay more off your mortgage, the amount that the policy covers reduces in line with the outstanding balance of your mortgage. Under normal circumstances the policy will end once the mortgage is paid off. It is the most common and the cheapest form of mortgage protection. Generally, your premium does not change, although the level of cover reduces.
Level Term policy: The amount you are insured for and the premium you pay remains level. This gives you the same amount of cover throughout the term of the mortgage. If you die before your mortgage is paid off, the insurance company will pay out the original insured amount. This will pay off the mortgage and any remaining balance will go to your estate.
Serious Illness: If you wish to, you can add serious illness cover to your mortgage protection policy. This means your mortgage will be cleared not only if you die but also if you are diagnosed with, and recover from, a serious illness that is covered by your policy. This will be more expensive than other types of cover.
Life Insurance policy: You can use an existing life insurance policy as long as it is not already pledged or assigned to cover another loan or mortgage and it provides enough cover. Additionally, if there is a balance remaining after the mortgage is clear, this will go to your dependants as a tax-free lump sum.
Contact us at (719) 244-5653 to see how we can help you with mortgage protection insurance.