Protection Plans

Mortgage protection is so important for a variety of reasons. Sometimes people assume mortgage protection relates only to life cover. However, it is important to consider covering other risks to your ability to pay your mortgage repayments. For example, if you’re a couple reliant on two incomes to pay a mortgage and one income is lost, a mortgage protection plan can also include cover to ensure your mortgage is paid while you address the issue.

Mortgage protection plans can also provide cover for when a partner dies leaving behind a widow that otherwise would not be able to cover the mortgage. There are many different levels of cover available and we are able to offer impartial advice as to what type of cover may be suitable for your circumstances.

If you become unable to pay your mortgage and it isn’t protected, then you are at the mercy of your lender. The mortgage still needs to be paid. Depending on the circumstances, most banks may be compassionate enough to allow some time to sell the property, if you can’t pay the mortgage. But, of course, there is the possibility that they could take the house, particularly if there aren’t extenuating circumstances surrounding your inability to pay.

Life insurance, in its simplest form, is the payment of a lump sum by an insurance company to another individual, when someone dies. There are nuances in terms of how we set those policies up, which is where proper advice is important.

Life cover can be set so that the amount of insurance never goes down as years go on, or it can decrease along with a debt that’s decreasing, like a mortgage. You will need to set a term for that life cover for 20 years, 30 years, 40s, whatever the term is.

Lots of people often get this confused with terminal illness cover, which is included in most basic life insurance policies. This comes into play when a doctor diagnoses you with less than twelve months to live. Often the life insurance company’s policy will pay out before your death.

Critical illness cover is very different. There is payment of a similar lump sum, but this is payable on diagnosis by a doctor of a critical illness. Different insurers have a huge range of illnesses that they deem critical illnesses, but usually always include cancer, heart attack and stroke. Having a policy that pays out a lump sum on diagnosis of an illness when you can no longer work, or won’t be able to for some time, can be a huge relief. If it’s affordable, then this option is highly recommended.

Yes this is definitely possible and many insurance companies are even able to tailor policies to fit individual circumstances. Most policies are a blend of attributes of each type of cover and individual separate covers are not often used.

Income protection relates to what happens to your income and your job if you’re off work sick. Most employers will have some degree of sick pay policy, but there will be  a point in time where if you’re so sick that you can’t do your job, and you haven’t been at work for a period of time, they are going to stop paying.

Income protection replaces your income when you’re too sick to earn it yourself. If the subjects are detailed enough to need proper advice, it’s important to take it on income protection and critical illness.

Family income benefit is a type of life cover where a payment of money is passed to a family member if someone dies. In a two parent family, for example, should one of those parties die, family income benefit could pay the survivor an income, tax free, every single month.

It could be set up to pay the youngest child until they are around twenty-one, or whatever we deem a non-dependent age to be. Essentially, it’s a payment of income to help raise children. Monthly payments rather than a lump sum can be very convenient for families and it’s also a little bit cheaper than lump sum life cover.

In terms of budget it’s best to consider affordability in a holistic way, particularly as it is often taken alongside a mortgage. As Mortgage Brokers we will look at someone’s overall budget and consider mortgage and protection related matters together. Once we’ve agreed the overall budget, we can then perhaps sometimes mould the mortgage to ensure protection can be paid for as well.

There are layers of different options so being unable to afford a high level policy doesn’t mean that you should not have any protection, it’s better to have something in place, than no cover at all.