Life Cover

Life cover makes sure that the mortgage is repaid in full if you die during the term of the loan. It means that the people you care about aren't left with a home to pay for when you are no longer around. Worse still they won't have to loose the home you have worked so hard to buy. It is hard enough loosing someone special to them without losing their home too.

The cover can be arranged on a level basis or a decreasing basis-

Level cover means that the sum assured remains the same throughout the term of the policy. For example a plan for £60000 over a 25 year term would pay out £60000 if a claim was made in year 2 or £60000 if a claim was made in year 20. Level cover is usually used for family protection rather than covering a mortgage but there are some types of mortgages it is suitable for including an interest only mortgage linked to an ISA investment.

Decreasing cover is recommended to cover a repayment mortgage as it is designed so that the level of cover decreases in line with the balance outstanding on the mortgage. It will repay the mortgage balance at any time during the mortgage term provided that the mortgage payments have always been met.

Often Terminal Illness cover is included so that if you were diagnosed with only 12 months to live then the sum assured would be paid out then rather than waiting until you died.

Waiver of premium or premium protection is also an important option as this ensures that, for a few pence increase in the monthly premium, if you were unable to work due to accident or illness after a certain period say 6 months the premiums would be covered. This means that you are not in the position where you have to cancel valuable cover when you may need it the most because you can't afford the premiums.