Most people do not know how to choose mortgage cover or even know they have a choice, but they do and that is why the Mortgage Protection website was created.
Choose Your Mortgage Cover
Too often mortgage brokers hear of people who believe they must take out the mortgage protection insurance that the bank offers.
Of course, the bank staff do not try to suggest differently!
But, there is absolutely nothing to say you need to take the banks mortgage protection policy and in many cases the cover that they offer is not going to be the best mortgage cover either.
Check Out The Mortgage Protection Reviews
When you search the internet for insurance comparisons and especially any reviews on mortgage protection insurance it is hard to find anything and this makes it very difficult to make an informed choice.
There are mortgage protection covers offered by a number of the leading insurance companies and then some banks have created their own policies (and insurance companies) plus there are some industry providers that offer cover to certain industry sectors. When the Mortgage Protection website was created there were some issues getting the policy wording from some of the banks, and we believe that due to the poor quality of some banks mortgage cover they did not want the bank policies included in the reviews.
It really makes you wonder how they would really compare when the management are not even willing to have someone impartial to review them…
Start With The Big Choices First
When you start looking at the various brochures or start to review mortgage cover online you need to decide on a method or checklist for how to choose mortgage cover.
Start with the two big questions;
- Do you need the whole mortgage paid off on death?
- Do you want to cover your mortgage repayments?
Most people including bank staff and insurance brokers automatically think that the mortgage needs to be repaid in full upon death, but this is not always the case. Sure, you may want to keep your family in a freehold family home, but you should also consider if the surviving spouse can afford to pay some of the mortgage and also consider what would happen upon death – maybe the surviving person would sell or downsize?
More importantly in most cases, you need to decide if you could afford to maintain the mortgage repayments and therefore keep the house if you were unable to work for ‘say’ 6-months, or worse were never able to work again. Too often the mortgage protection insurance sold by the banks is just straight life cover and there has been no thought on how long you could continue to meet the mortgage repayments if you were unable to work.
Once you choose the two key types of cover you can start to consider how to structure the policy to meet your requirements and of course your budget.
Structure Your Mortgage Protection Cover
There are a number of decisions that you need to make when deciding on the structure of your mortgage protection cover before you should even think about which company you purchase your policy from.
The life cover from the various insurance companies are quite similar so the questions mostly relate to the mortgage repayment cover – life cover can be purchased based on price.
Some of the key policy differences and therefore your considerations for the mortgage repayment cover are;
Waiting Periods – how long can you survive if your income stops? This is known as the waiting period and you need to consider any sick leave entitlement and with home loans you should be able to apply for a 3-month mortgage holiday if you are unable to work.
Claim Period – how long would you want the claim to last? Many policies are limited to paying a claim for a maximum of 2-years, but what would happen if you were never able to work again, or could only ever work in a limited capacity and therefore earn less?
There are also lots of small benefits with some policies which may be important to you, but you should always deal with the big issues first as that limits how many policies you will need to compare.
The Policy Wording Is Critical
Not all insurance policies are created the same…
The insurance policy wording (definitions) are what make the insurance contract work at claim time so it is important that you get the best policy wording to minimise any “wiggle room’ that the insurance company might have if and when you ever need to make a claim.
The biggest issue with any income cover and mortgage repayment cover is the disablement definition including the treatment with partial disablement.
What About The Cost Of Mortgage Cover?
Cost is an important issue, and is one of the reasons that so many people are under insured.
When you consider the cost you should be thinking in terms of ‘value for money’ rather than being focused on finding the cheapest mortgage cover. Like most things, cheap means poor quality and the last thing you want at claim time is the regret that you selected your mortgage cover on price rather than making a little more effort to ensure that you had a good policy.
You can structure a policy to save money and still retain the key policy benefits.
Good insurance advisers will know the difference with the various policies and he able to help you decide how to choose mortgage cover and they can access external research on the policy wording so that you can select the best quality policy.
They can offer you choice!
Insurance advisers can also provide comparative quotes and help you implement the policies so there are no errors that might cause issues at claim time.
Best of all – most insurance advisers are remunerated by the insurance companies, so their service is free for you.
This is a simple lesson on how to choose mortgage cover!