Mortgage life cover or mortgage term assurance as it is also known is usually a requirement made by a lending institution before they will release funds you have agreed to borrow for the purchase of a home.

 

In simple terms it is an insurance policy that will pay the outstanding amount owed on a home loan on the death of a mortgage holder. Occasionally there may be an excess balance remaining from the life cover which would be paid to the next of kin or to the estate but this is usually a very small amount. The main difference between mortgage term assurance and level term assurance is that the amount of cover on the former is a reducing figure, generally in line with the reducing amount owed on the mortgage. In most, but not all, cases the amount of live cover with a level term assurance policy does not change over the duration of the policy.

 

As the amount of cover is reducing, mortgage life cover tends to be significantly cheaper than level term life cover. However, some borrowers do arrange a level term life cover policy when taking out a home loan as it will mean there will be an excess amount left to dependants in the event of their death.

 

As with level term assurance, serious illness cover is an option when taking out a mortgage life assurance policy. As the name suggests, this will mean the balance on the loan will be paid by the policy in the event of a policyholder contracting one of the illnesses specified. This can greatly reduce the pressures felt by a mortgage holder if they do contract a debilitating illness.

 

I would strongly advise seeking advice from an independent adviser or broker if you are required to arrange mortgage protection as they can usually provide it at a much lower cost than the lending institution and therefore save you a substantial amount of money. If you would like more information, you may contact me on 087 9308181 or gerard@proactivefinance.ie.

 

Gerard Ward

10th January 2018