Life insurance versus mortgage protection cover
When you reach the time of life when you are in a position to buy a home, no matter how unenthused by life insurance and mortgage protection cover you may be, these are both products you need to seriously consider purchasing. Both life insurance and mortgage protection cover provide peace of mind that, should you die, your loved ones will receive the financial protection they need. But which product is best?
Mortgage protection insurance
If tragedy were to strike and you were to die before the mortgage on your home were paid off, your partner could be burdened by these payments, without the benefit of your income. This is precisely why mortgage protection insurance was designed: to pay off the mortgage so your partner is not forced to sell the family home. In the majority of cases, mortgage protection insurance is bought at the same time you buy your home however it can be reviewed and replaced at any stage during the term of the mortgage. Over the years the amount paid upon your death will decrease along with the mortgage’s balance.
Life insurance
Unlike mortgage protection cover, life insurance is purchased at any time throughout your life. The two most common types of policy are Whole of Life and Term Assurance. Whole of Life requires the payment of premiums throughout your lifetime where Term Assurance, which does not cost as much, will last for a predetermined period of time, typically any term from 10 or 35 years.
Key differences
The key difference between life insurance and mortgage protection cover is that the latter is designed specifically to cover mortgage repayments in the event of your death. A life insurance policy differs from mortgage protection in that the cover remains same throughout the life of the policy. Many people find this makes life insurance more suitable as additional coverage, which works best in tandem with mortgage protection cover.
What does this mean for you?
Many people choose to supplement mortgage protection cover with term life insurance. This ensures peace of mind that the mortgage repayments will be taken care of, whilst providing additional financial security for other expenses. On the otherhand, you may opt for a more comprehensive life insurance policy, which is substantial enough to cover not only the mortgage, but also to provide your partner with a tax free lump sum.
