Mortgage life insurance provides financial protection specifically for your mortgage. In the event of your death, the cover pays the policy sum assured which should equal the outstanding balance of your mortgage, ensuring that your family can remain living in the home. Since you’re already paying for the mortgage you may feel that the extra expense of mortgage life insurance is too much, but in fact it’s possible to get discounts that make this insurance much more affordable. Don’t Buy Mortgage Life Insurance from Your Lender Your lender will strongly recommend that you take out mortgage life insurance, and just as strongly suggest you obtain your insurance from them or an appointed representative. However, shopping around and choosing an independent insurer is very often the most effective way of reducing the costs of any type of insurance. Obtaining insurance from your lender may be slightly more convenient, but this convenience comes at a price. Level Term and Decreasing Term Insurance Decreasing term insurance is typically less expensive than level term insurance, because in the former case the amount you are insured for decreases as the amount of your outstanding mortgage balance decreases. Level term cover, on the other hand, provides a fixed sum in the event of a claim, regardless of your outstanding balance. Choosing a decreasing term policy can save you a few extra pounds each month; however it’s best to get quotes for both products before deciding between the two. If the difference between the two quotes is minimal, level term insurance is worth getting because it means that in the event of a claim there may be money left over for your family after the mortgage is paid. Joint Policies If you and your partner jointly own the home and the mortgage, it’s also worthwhile getting quotes for a joint policy and for two separate policies. A joint policy is not always cheaper, but it costs you nothing to find out, and getting quotes for both will help you to be aware of your options. One point to bear in mind though – if a joint policy pays out on the death of one policyholder, the plan will cease and the survivor could be left without cover (unless a continuation option is selected). Health Matters Just as with any other kind of life insurance policy, your health and lifestyle play an important role in determining how much you pay. If you’re a smoker, overweight, have a high-risk job or hobby, or a medical condition such as high cholesterol or diabetes, you can expect to pay higher premiums. Your health is so influential that it’s worth reviewing your policy if your health improves substantially in comparison to when you first obtained it. Smoking and obesity, in particular, increase the costs of life insurance by 50% or more, so it’s worth going through the application process again if you know you’re eligible for substantial savings. Choosing a Policy When it comes to mortgage life insurance, choosing the best policy really can be as simple as choosing the cheapest one. Mortgage life insurance has no investment value and once you’ve made the decision between level term and decreasing term, your other decisions are typically based purely on the cost of premiums. To get the cheapest premiums it’s usually best to work with an insurance broker rather than doing the legwork of getting quotes yourself. Choose your broker carefully as some offer rebates or discounts that can make your policy even cheaper.
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