Personal insurance

A requirement of many lenders is that you take out a form of life assurance, so that in the event that you die or become terminally ill, the mortgage will be repaid. As with buildings and contents, mortgage lenders will often try and guide you toward their own products. However many mortgage lenders only have access to products from one insurance company. There are thousands of insurance deals on the market and this is why it’s important to ensure you find the deal which is best suited to you.
In broad terms, there are three main types of insurance on offer. These are Level Term assurance, Decreasing Term life insurance and Permanent health insurance.
Level Term Assurance
With this type of insurance the amount of cover remains constant over the life of the mortgage policy. The premiums are arranged at the beginning and do not change, providing you make all your repayments. This kind of cover is suited to interest-only repayment schemes where the amount of capital owed remains constant throughout the mortgage scheme. If the insured person dies, then a lump sum of money is paid out. When the policy has expired, there is no cash-in value for the policy.
Decreasing Term Assurance
As the name suggests, the amount of cover decreases over time with this policy. This scheme is best suited to people who have taken out repayment mortgages, because the amount of money assured to them, reduces roughly in line with the amount of capital owed. If the policy holder dies, then the amount of money assured, should in theory match the amount of capital still owed.
Mortgage Payment Protection Insurance
Mortgage payment protection insurance is also known as accident, sickness and unemployment insurance (ASU). This type of insurance covers mortgage repayments if you become sick or unemployed. It is a particularly safe option to take in light of the cuts to state benefits. At present, the Department of Social Security (DSS) only contributes to mortgage benefits after nine months of unemployment has elapsed. This means that if you become unable to work for one reason or another, you will still be liable to keep up mortgage repayments until then. When the DSS benefits are paid they are still not guaranteed to cover your costs. The DSS pays mortgage benefits at a standard rate, and if this doesn’t cover your costs, you are liable to cover what is remaining. If you take out this form of insurance, you can have peace of mind knowing that your mortgage repayments will be maintained if you are unable to bring in an income.
Other insurance
In addition to the forms of health insurance already mentioned above there are schemes available if you want to change or renew your insurance plan.
Convertible term insurance
You can convert an existing term insurance policy into a permanent one providing you convert it before the end of the policy. You are guaranteed to be accepted for such a type of insurance but your premiums may be more or less than the term insurance, depending upon your age and sex. The amount of money which is assured can not be increased
Renewable term insurance
When your existing policy has reached the end of its term, if you have a renewable term insurance you will be able to exchange this for a new one.
Buy-to-Let mortgages
These are mortgages designed for people who buy a property so as to let it out privately.