Frequently Asked Questions

What is a Mortgage Protection Policy?

A Mortgage Protection Policy is a life assurance policy which is designed to discharge a mortgage in the event of the death of one of the life assureds, so that the survivor doesn’t lose their home. You choose the initial cover amount and this reduces each year during the term, in line with the estimated balance outstanding on a principal and interest mortgage. It is the cheapest form of life assurance you can buy.

When taking out a mortgage you will be required to provide a Mortgage Protection Policy to your mortgage bank. A significant number of mortgage borrowers buy their mortgage protection from the bank at the same time they are getting their mortgage. As banks have a captive client base they aren’t seeking to be the cheapest so if you take it from the bank you will usually overpay by a substantial amount. When you add up the extra premiums over a twenty or thirty year term the additional cost can be significant.

Furthermore, if you buy your Mortgage Protection while taking out your mortgage, you may often be sold a Joint Life First Death policy. This type of policy pays out on the first death if that happens within the term, and it is then at an end. A number of life assurance companies offer Dual Life Mortgage Protection and some will provide this for the same cost as Joint Life First Death. Dual Life is like having two Single Life policies. With Dual Life cover if one of you were to die during the term the policy pays out and it then continues on and will pay out again if the second life were to die within the term (this payment would go to your estate to care for your dependents).

Can I get a policy for less if I go direct to a Life Assurance Company?

No, the price you pay for your policy is based on your age, health and smoker status. We will give you the maximum discount available. You won’t obtain the policy for less by going direct. As discount offers change regularly you need to act without delay if you are to secure the price quoted.

How should my policy be structured?

Your Mortgage Protection cover policy should include reducing life cover only. While it’s good to have additional life cover to protect your family as well as Specified Illness, you should never write this on the same policy as your Mortgage Protection. Your Mortgage Protection policy will be assigned to (and therefore owned by) your bank. If there is a claim (even in respect of illness) it is the bank who are entitled to the proceeds, not you. Any additional cover which you take out should be written separately and not assigned to any third party, so that if you have a claim, it benefits you. If you want to explore taking additional cover we can help as we provide all forms of protection products.

We’re cohabiting but we’re not married – how could this affect us when taking out Mortgage Protection?

If you are cohabiting but unmarried and not in a civil partnership you are deemed to be strangers in tax law. This means that in certain circumstances a payout from a life assurance policy can be subject to Capital Acquisitions Tax at 33%. This could have serious implications for a survivor. Prior to writing your policy we will ask you to complete a short factfind and if this applies to you we will show you how to deal with it.

When should I start the process of taking out Mortgage Protection?

You should get your Mortgage Protection in place well in advance and prior to signing contracts for the purchase of your home, for three reasons;

Your proposal must go through the medical underwriting process. The underwriters could seek a letter from your GP (known as a PMA), they could require you to do a Nurse medical or they could require you to do a GP medical. Ironically the least onerous of these, the PMA, can take the longest to complete as GP’s are generally so busy that they don’t get priority.

If you are a joint purchaser and you have a definite plan to purchase a house, your plan is at risk and the survivors housing situation would be in severe doubt, if one of you were to die as the survivor may not be able to obtain mortgage approval alone. Even an adverse medical test result could throw your plan into trouble. For this reason it can make sense to take out cover as soon as you start your house hunt (however you will need to add to the term and cover amount to ensure that you have sufficient cover to satisfy the bank when you draw down your mortgage).

Lastly, you must disclose any material facts when completing the answers to medical questions on the proposal form, however you must also disclose any material facts which you become aware of between proposal stage and the date the policy is issued, so if either of you were to contract an illness or have an unfavourable test result which might affect your ability to obtain mortgage protection between now and the date the policy is put live, this could prevent you from getting cover which could prevent you from obtaining a mortgage. If you want to protect your family from the possibility of becoming homeless, the time to take out a Mortgage Protection policy is now. As you need the Mortgage Protection policy to be for at least the amount and term of your mortgage, you can achieve this by adding a year or two to the term and writing it for a small amount extra. Your adviser will be able to calculate how much additional cover you need. The cost of an additional year or two will usually be negligible, you will have peace of mind and one more job ticked off the list.

Should I go with the quickest provider?

It can be tempting to go with the provider who comes up with the goods first but speed is not the most important factor in buying mortgage protection.

As outlined above, if you have a medical issue it must be disclosed to the insurer in the proposal form which you sign. If you complete the proposal over the phone you should be sent the completed proposal form for review. You should check it to ensure that any medical issues are disclosed. Where you answer yes to any of the medical questions at the very least the insurer will want further details on the ailment in order to determine if it could affect your life expectancy.

When there is a claim on a life policy the insurer will investigate whether all relevant information was provided at the time of proposing for cover. In the event of non-disclosure the insurer may refuse to pay the claim. Even if a life assured was to die due to an illness which had nothing to do with the non-disclosure, the insurer may reduce the payout, because they may deem that the person was only partially insured, as they didn’t pay a premium which reflected their health status at the time they proposed for cover.

If you are offered life cover without being asked for further details on any medical issues which you disclose, you should exercise caution.

I already have Mortgage Protection cover in place but I think I am overpaying – can I replace it with a new policy which costs less?

Yes. The cost of life cover has reduced in recent years. Depending on when and where you bought your existing cover you may save a substantial amount of money by re-writing it. We can’t know that you are replacing cover unless you tell us. If you are replacing existing cover let us know and if you like we will review your existing cover to ensure that we compare like with like. We don’t charge for carrying out this review as we hope that you will do business with us.

When replacing your cover, you should note the following;
When you receive a quote for protection cover, it is subject to medical underwriting. You should not cancel your existing cover until you have received the policy schedule for your new cover, as you can be declined cover or your premium can be loaded.