Life insurance - Things to Look Out For when protecting your mortgage

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It is a well-known (and also completely made up) fact for that in the UK more people die annually of mustard-related injuries than from badger attack. Death is something that will come to us all (certainly the risk may be increased if you have a love for some fiery condiments); so don't be a life insurance ostrich and bury your head in the sand, read on to find out how you can protect your family, preferably before the next time you feel compelled to open the Dijon...

The alarming fact that we all put to the back of our minds is that life can be taken from us at any time. There are no guarantees on how long we have, and to base your financial decisions on the assumption that you are a modern day deck is unwise, especially when other people's wellbeing might also be affected should the worst happen.

For most people, their mortgage is the biggest financial commitment they have. Mortgages are usually for large sums of money, set over long terms and are based on the assumption that you will live long enough to pay it off. But what if you don't? If you have a mortgage and you die, your partner/spouse/family/housemate/goldfish/terrapin (delete as appropriate) would either have to find a way to continue paying, or lose their home and face a difficult move. Life insurance can monitor the mortgage balance in full in the event of your death, and leave your loved ones in a more stable financial position.

I'm sure that you will be comforted to know that life insurance (insurance and insurance rather confusingly mean the same thing here) is similar to other types of insurance, insofar as those who are the most likely to claim from it have to pay the most! Where it does differ however is the length of time it takes to underwrite the policy, which can often take several weeks if the insurer has to write to your GP.

Factors that affect how much you pay include:

Age
Gender (ladies live longer than gentlemen.) Sorry guys it's true - I am convinced this is due to males being more inclined towards mustard-based foods!)
Weight
Occupation (if you work at heights like Superman, or drive a lot for work, you will pay more)
Lifestyle (if you smoke, drink excessively, travel to exotic countries, or in your spare time are a member of the Scunthorpe synchronized Bungee Jumping Display Team - sorry, you'll pay more)
Medical history (both yours and your immediate relative ')

Many insurers will be able to give you a quick quote of how much your policy is likely to cost. but be prepared for that to increase if they take a more detailed look at your lifestyle and medical records as part of the underwriting process.

What type of cover do I need?

The type of cover usually used to cover a mortgage balance is term insurance, so-called because it will provide protection in the event of your death, but only throughout a specified term. When covering a mortgage, there are two types of term insurance to consider:

Decreasing Term Assurance (DTA) is a type of insurance that decreases over a specified period, in line with how your mortgage balance reduces as it's repaid. This cover should be used to cover a Repayment mortgage.

Level Term Assurance (MAL) is a type of insurance that country a level amount if you die within a specified period. This type of insurance should be used to cover an Interest Only mortgage, where your mortgage balance remains the same throughout the term.

If your Interest Only mortgage is linked to an investment, such as an Endowment, you may have some cover already-check your paperwork to see if this is the case. A lot of Endowment policies are running at a shortfall, but don't assume that your life cover on this only covers you for the amount your Endowment is projected to be worth, it is most likely set up to pay the amount the policy was originally expected to reach - which could be substantially higher!

To cover your mortgage there are three key things you will need to know:

the type of repayment method
the term you have remaining
the current balance. When checking the amount you need to be covered for, be sure to include any fees that are going to be added to your mortgage balance. You are borrowing these too, so make sure the amount you are actually borrowing is protected by your policy!

[If you are currently applying for your mortgage, all this information can be found in Section 3 of your Key Facts Illustration handily or Mortgage Offer]

However, these aren't ain't the only things you need to think about when arranging life cover to protect your mortgage. Take a look at these tips for other things you should be considering:

Shop around. The staple of any money-saving guide! Prices vary widely between insurers so don't settle for the one your Bank or Building Society offer without getting some quotes to compare against.
Don't just cover the breadwinner or main earner. If your partner doesn't work, there is still a financial impact if they die prematurely.
Seal cover and single cover. It's up to you whether you choose to cover yourselves singly or jointly. In terms of cost joint policies are cheaper than two single ones, but only very marginally. For a little extra two single policies can provide double the cover of a joint one!
Consider writing your policy in trust. When you die, everything you own (your assets) is totalled up. If your assets exceed a certain threshold (at the time of writing £ 325,000 for a single person, or £ 650,000 for married persons or civil partners) your estate will be subject to Inheritance Tax. Your life insurance policy would form part of your estate. By writing it in trust this becomes outside of your estate; Therefore you can ensure that the money goes directly to the person you want it to, without incurring any Inheritance Tax. If you are in any doubt about what to do seek professional guidance from an Independent Financial Adviser or Solicitor.
If you are on a budget and cannot afford the premium that the insurer offers you, why not try getting as much cover as you can for your money - at least you'll have some protection. If you can only afford to pay £ 20.00 per month for cover, most insurers will let you specify this for a quotation and then return the amount of cover they will give you for this price.

Like your mortgage, your should regularly review your life cover to ensure it still fully protects you, and that you are paying a competitive price. Make sure that you take your life insurance into account every time you bad, or change your mortgage in any way (for instance by borrowing more).

Moneyfacts.co.UK is the leading independent financial information provider in the UK. Since 1988, we've been providing impartial information to financial services professionals which has helped thousands of customers get the best deal on their mortgages, savings accounts, credit cards, loans and other personal finance products.

http://www.Moneyfacts.co.UK Limited is authorised and regulated by the Financial Services Authority (FSA).

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Ten things you should know about life insurance

1. The primary motivation for the purchase of life insurance is to ensure that your loved ones are cared for your death.

2 Life insurance policy are calculated by insurers that determines the amount of the money to replace your income in the event of your death.

3 Life insurance is usually purchased to cover the cost of mortgage re-payments and other bills, in case of death of the people responsible for the payment of the mortgage; special policies exist that premium costs reduce the amount of outstanding mortgage reduced, they are known as mortgage life insurance.

4. Insurance policies vary according to their rates of assessment for the maintenance of the policy and the amount payable on death or termination of the contract (the sum insured), according to certain characteristics of the policy holder - including age, gender, health and the profession.

5. There are three types of political life insurance; Term insurance is a contract which lasts for a fixed term and aims to provide financial protection against death; Life resembles a financial investment, a premium is paid at specific intervals and is designed to provide the sum insured in case of death or at a specified future date; Insurance staffing is similar to the whole life, however, these mature policies, which means that after a certain time the sum insured is payable if the policy holder is dead. For the latter two types of insurance, there is an option to abandon the policy at any time to receive a lump sum, the amount will be determined by the length and the amount of the premiums paid thus.

6 Life is very difficult and expensive to obtain after the age of 70; generally, you are more your contribution rate will be.

7. In General, people who smoke are offered very high premiums; This is because smoking is regarded as a very high risk.

8 For an insured amount to be paid to a person in case of death, the policy must be active at the time of the event.

9 Numerous insurance policies offer cover terminal illness and will pay-out in the case of terminal illness, once a physician certified that death should be held within 12 months.

10. The minimum term for a life insurance policy is normally a period of 2 years, although most of the policies will last between 20 and 25 years or more.

Life insurance should be considered as a feature to your financial arrangements, they will provide you with peace of mind that your family will be supported in the event of your death.

Hanson Wealth Management is a UK independent financial advisor. Hanson are the only mortgage brokers approved by the Federation of the Police in England and Wales to provide the Police mortgage quote.

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Ten things you should know about life insurance

(1) The primary motivation for the purchase is to ensure that your love your death are maintained in the life insurance.

2. Life insurance are calculated by underwriters, the amount of money required, replace your income in your death determined.

3. Life insurance is acquired, usually to cover the costs of the mortgage re-payments and bills, in the event of death of persons, responsible for the payment of the mortgage Special rules exist, with the premium costs, reduce the outstanding mortgage amount reduced, these are known as mortgage life insurance.

4. Insurance policies vary the premium prices for the maintenance of the policy and the amount to be paid following death or termination of the contract (the sum insured), certain properties of the policy detectives - including age, sex, health and profession.

5. Three types of life insurance policies are available; Term quality assurance is a contract, lasts for a fixed term and focuses on financial protection against death; Life is like as a financial investment, a premium is paid in specific intervals and is designed to provide insured sum in the event of death or at a specified future date; Endowment assurance is similar to whole life insurance, however, these guidelines developed, which means that after a certain period the insured sum is payable whether the policy detectives have died. For both, the latter assurance is the possibility to surrender to the policy at any time to obtain flat rate amount set by the length and amount of the premiums paid to be.

6. Life insurance is very difficult and expensive to get to the age of 70; Typically, you are ever over your premium prices are higher.

7. In General, people are offered, the smoking, very high premiums This is because smoking is considered very high risk.

(8) For a sum insured to a person in the event of death release the directive at the time of the event must be active.

9. Many assurance policies offer cover terminal illness and will payout the incurable disease as soon as a doctor has confirmed that death will likely period of 12 months.

(10) The term for a life insurance policy is usually a period of 2 years, although most directives take between 20-25 years or longer.

Life insurance should be considered the peace of mind that your family will be looked after you necessary component of your financial arrangements, will provide it in the event of your death.

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