Taking out a mortgage is one of the biggest financial commitments you will ever make. Whether you’re purchasing your dream home or expanding your property portfolio, ensuring that your mortgage remains manageable in times of uncertainty is essential.
Having the right insurance cover in place provides peace of mind that, should the unexpected happen, you and your loved ones will not struggle financially.
There are three key types of mortgage protection insurance that are essential considerations for homeowners:
- Life Cover
- Critical Illness Cover
- Income Protection
Find out how much protection insurance you may need to protect your mortgage and your family.
Use our calculator to get an indication of the cost of insuring the mortgage and your family.
Life Cover: Protecting Your Family’s Future
Life cover, also known as life insurance, is designed to pay out a lump sum in the event of your passing. This ensures that your mortgage can be paid off, preventing financial hardship for your family at an already difficult time. Without life cover, your loved ones may struggle to maintain mortgage repayments, potentially resulting in losing their home.
There are two main types of life cover:
- Decreasing Term Life Insurance – Often linked to a repayment mortgage, the payout reduces over time in line with your mortgage balance.
- Level Term Life Insurance – Pays a fixed sum, ideal for interest-only mortgages or to provide additional financial security.
With the right policy in place, your loved ones can focus on grieving and rebuilding their lives rather than dealing with financial stress.
Critical Illness Cover: A Safety Net for the Unexpected
A serious illness can impact your ability to work, consequently preventing you from meeting financial commitments. Critical illness cover provides a lump sum payment if you are diagnosed with a specified illness such as cancer, a heart attack, or a stroke.
This payout can be used to clear or reduce your mortgage, to adapt your home to new medical needs, or to cover essential living expenses.
Many homeowners assume their employer’s sick pay will suffice, but statutory sick pay is unlikely to cover a mortgage, let alone household bills and additional costs associated with a long-term illness. Having critical illness cover in place means you can focus on your health rather than your finances.
Income Protection: Securing Your Financial Stability
Unlike critical illness cover, which pays a one-time lump sum, income protection provides a monthly payout if you’re unable to work due to illness or injury. This is particularly important for self-employed individuals or those without long-term sick pay benefits.
Income protection policies typically cover up to 60% of your salary and continue paying until you recover or reach the end of the policy term. This ensures that you can keep up with mortgage repayments and maintain your standard of living even if you’re unable to work for an extended period.
Why Mortgage Protection Matters
Without the right protection in place, an unexpected event could lead to severe financial distress or even the loss of your home. While no one likes to dwell on worst-case scenarios, responsible financial planning means preparing for all possibilities. Investing in mortgage protection insurance is a proactive step to ensure that your home – and your family’s financial security – remains intact no matter what life throws your way.
At Fox Davidson, we work with leading insurers to tailor policies to suit your needs. Whether you’re a first-time buyer, an investor, or a high-net-worth individual, we can help you secure the right level of cover to protect your most valuable asset.
