Mortgage Protection & Mortgage Insurance: the Difference
You've taken out a mortgage for your first home, but what do you do about protecting yourself in case you aren't able to make the repayments? Is there really a difference between mortgage protection and mortgage insurance?
The answer is yes. Learn the difference. We have outlined the basic differences between Mortgage Protection and Mortgage Insurance.
Mortgage insurance is only offered by a few companies. It only covers for your minimum mortgage repayments if you are unable to work. If you pay more than your minimum repayments each month these companies, under this policy will only pay your minimum repayments.
Whereas mortgage protection is a more comprehensive option for people looking to cover their mortgage.
At Lifebroker we offer mortgage protection in the form of a combination of life insurance and income protection. The minimum life insurance amount suggested is the amount of the mortgage. As life insurance is flexible with the amount of cover that you can take out you can tailor it to your own personal situation. If you do not need the full amount of the mortgage for whatever reason then there is no need to take out that amount, if you want more than the mortgage to support your family or pay off other debts then this is also an option. Mortgage insurance does not offer this flexibility and you are required to take out the mortgage amount.
Income protection also offers a more flexible option than that of mortgage insurance. Income protection insures 75% of your annual income in the event that you are unable to work due to any sickness or any injury. The monthly benefit which you would receive if you were to go on claim is not restricted to paying the mortgage repayments. The benefit which you would receive is able to be spent on what you deem relevant to you. Obviously there will be a need cover the mortgage repayments, which would be a priority, but the rest of the benefit can be spent on other essential items.
The main difference between mortgage protection and mortgage insurance is flexibility. As both cover the same thing, mortgage protection offers you more flexibility and peace of mind.