What Is Mortgage Life Assurance?
Mortgage Life Assurance is designed to pay off the remaining mortgage debt on repayment mortgages if you die within a set period. It ensures your dependents needn’t worry about repaying the mortgage if you die.
Is it worth having?
Most lenders strongly recommend you get a policy when you take out a mortgage. It is useful protection and, if done correctly, should not be too expensive. It should be remembered that Mortgage Life Assurance does decrease in line with the mortgage debt therefore should you wish to maintain a certain level of life assurance then Level Term Assurance may be more appropriate for you.
How Much Does It Cost?
Mortgage Life Insurance has no investment element as the payment covers the balance of the mortgage. So it’s usually a simple case of the cheaper the better.
Costs depend on you
Policy costs increase with mortgage size and length as well as the likeliness of your death during the term. This means age and whether you smoke are big factors. For those who quit smoking, once you’re clean for a year, it is worth a re-quote as the price may have reduced substantially.
Again if you already have a policy and you have stopped smoking ask us for a re-quote, we may be able to reduce your premiums. Some Mortgage Life Insurance policies also factor in health, occupation and participation in risky sports.
Consider writing in trust
If you die the life assurance payment will then form part of your estate. This may make the value of your estate liable to Inheritance Tax. In many cases you can avoid this by writing the policy in trust – which means the payment goes direct to your dependents, avoiding inheritance tax. This is relatively easy to do as with most insurance policies they include the option (and papers) for writing in trust directly, at no extra charge.
These types of plan will have no cash in value at any time, and will cease at the end of the term. If premiums are not maintained, then cover will lapse.
Inheritance tax planning and trusts are not regulated by the Financial Conduct Authority.