Mortgage protection insurance is a type of life insurance policy that pays a lump sum direct to your lender to pay off your mortgage if you die. Your policy runs for the same length of time as your mortgage, and the amount you pay each month is fixed for the term of the mortgage. It is one of the cheapest forms of life insurance.

Do I need mortgage protection insurance?

If you are under 50 when you take out a mortgage for a home you will live in, your lender must make sure you have life insurance to pay off the loan if you die. The main reason for this is to make sure your family home would not have to be sold to pay off to clear your mortgage. You do not have to take out this insurance if you are over 50 or if your mortgage is on an investment property, but it can be an advantage and some lenders may insist on it as a condition of getting the mortgage.

How much cover do I need?

Your mortgage protection sum assured is the amount that would be paid out to clear your mortgage if you died, so it must be at least as much as your mortgage. It generally reduces from year to year as the amount you owe on your mortgage goes down. This is called reducing term insurance.

Can I add serious-illness insurance to my mortgage protection policy?

Yes, many policies now give you this option in return for paying a higher premium (sometimes more than double the cost).Adding serious-illness insurance usually means your mortgage will be paid off if -

This is called mortgage protection with accelerated serious-illness insurance.