You have an Interest Only Mortgage. What sort of Life Insurance do you need?

You need normal, level cover, Life Insurance.

STEP 1 of 2
Type of cover
Life Insurance       Mortgage Life Insurance
 
Cover Level (£)

Number of years
Do you want:  
Critical illness cover
Family income benefit
 

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What is Mortgage Payment Protection Insurance?
Mortgage Payment Protection Insurance pays your monthly mortgage repayment if you were off work due to sickness, accident, or unemployment. (Don’t forget that your home is at risk if you fail to keep up the repayment of loans secured against it.)
How long should I insure for?
It makes sense to keep the insurance in place for as long as you have a mortgage.
For how long will the policy continue to pay your mortgage?
The Mortgage Payment Protection Insurance will pay your mortgage for up to 12 months or up to when you return to work, whichever is the sooner.
Can you keep your Life policy on if you pay your mortgage off early?
As far as the insurance company is concerned, until your policy reaches the end of its term and you continue to pay the premiums, you remain insured.
Should you have a “Guaranteed” or a “Reviewable” policy?
A Guaranteed policy is usually better value overall but a Reviewable policy will be cheaper at the outset.
Level cover Life Insurance makes sure that the capital you borrowed on your interest only mortgage would be repaid in full if you died.

The Life policies we offer also include Terminal Illness cover free of charge. Terminal Illness cover ensures that your policy will also pay out if you become terminally ill and were not expected to survive more than 12 months.

With an interest only mortgage, the amount of cover you need remains constant as you do not repay any of the capital borrowed until the end of your mortgage. Therefore, your insurance policy needs to provide you with a fixed and constant sum insured. This is exactly what level cover Life Insurance does.

If your mortgage is held in joint names your cheapest option is to have a Joint policy (almost all mortgage providers will insist on both mortgage holders being insured).

For mortgage purposes, Joint policies are written in what is called first life. This means that the policy will pay out if either of you were to become terminally ill or die or during the policy’s term. It is important to note that once a Joint policy has paid out on a first death or terminal illness, the policy is finished - it will not pay out again if the second person were to die.

All proceeds from insurance policies are paid to you tax-free.

Please note:
If you want insurance that would pay your monthly mortgage payments if you were off work through sickness, accident or unemployment, then you should have Mortgage Payment Protection Insurance.

If you want insurance that repays your outstanding mortgage capital if you became critically ill, you need Critical Illness Insurance.

Frequently Asked Questions related to the above topic.
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