Understanding Mortgage Protection: Do You Really Need It?

Taking out a mortgage is likely to be the biggest financial commitment of your life. But what would happen to your home — and your family — if you were suddenly unable to work, or if you were no longer around to meet the repayments? Mortgage protection is worth thinking about carefully.

What Is Mortgage Protection?

Mortgage protection is a broad term covering several different types of insurance that can help ensure your mortgage repayments are met if things go wrong. The most common types are life insurance, critical illness cover, and income protection.

Life Insurance

A life insurance policy pays out a lump sum in the event of your death. This could be used to repay the outstanding mortgage balance, ensuring your family doesn't face the risk of losing their home. Decreasing term life insurance is often used alongside a repayment mortgage, as the level of cover reduces in line with the outstanding loan amount.

Critical Illness Cover

Critical illness cover pays out a lump sum if you're diagnosed with one of a specified list of serious illnesses — such as certain cancers, heart attack, or stroke. This money can be used however you need it: to repay your mortgage, adapt your home, or cover everyday expenses during recovery.

Income Protection

Income protection insurance pays a regular monthly benefit if you're unable to work due to illness or injury. Unlike critical illness cover, it isn't limited to specific conditions — it covers any illness or injury that prevents you from working. This can be particularly valuable for the self-employed, who don't have access to employer sick pay.

How Much Cover Do You Need?

The right level of cover will depend on your individual circumstances — including the size of your mortgage, your income, your existing savings, and any employer benefits you have in place. Taking professional advice can help you identify any gaps in your protection and choose appropriate cover without paying for more than you need.

As with all insurance policies, conditions and exclusions will apply. Options Mortgage Services can provide advice on suitable protection products alongside your mortgage.