If you’re taking out a mortgage, the chances are you’ll need to consider some form of insurance as the mortgage lender will potentially insist upon it.
So, like our simple to understand mortgage descriptions, we’ve listed the main types of insurance policies below:
Level Term Life Assurance
Basically pays out a set sum if you die whilst the policy is active. It’s referred to as level term as the amount remains the same throughout the life of the policy and doesn’t reduce. In the event of your death, a tax- free lump sum is paid and can be used by your dependants to clear any outstanding mortgage or spend however they choose.
Decreasing Term Life Assurance
Also pays out a lump sum in the event of your death but, as the title suggests, this amount decreases over the life of the policy – usually following the amount still left on a mortgage. These policies are generally taken out to complement a repayment mortgage so any lump sum amount paid is the same as the outstanding mortgage thus allowing your dependants to clear the debt.
Family Income Benefit
Is intended to pay your dependants a regular amount rather than a lump sum payment in the event of your death. It provides a regular, tax- free income until the end of the policy term.
Policies pay out a tax-free lump sum if you develop a serious illness such as some forms of cancer, suffer a stroke or heart attack (plus many other illnesses depending on the policy). The money is paid once the diagnosis is confirmed and can be used however you wish. However these policies cover a specific list of illnesses and therefore the cheapest may not always offer you the cover you may eventually need.
Is designed to pay a monthly amount to replace a proportion of your salary if you are unable to work due to illness or an accident. The payments begin after an agreed period and will continue until the policy terms ends, you return to work or reach retirement age.
Building and Contents Insurance
Is probably the most widely recognised type of policy as all mortgage companies will insist you have buildings insurance in place to protect their investment. This type of policy will pay out to repair the bricks and mortar or rebuilding costs of your home should it be damaged by fire, structural problems or natural events. Contents insurance protects your possessions in and out of the home. It usually covers loss, damage or theft of furniture, appliances or personal belongings and is not compulsory.
Hopefully you’re now more familiar with the most common insurance types, so relax knowing that through our panel of trusted insurance providers, we will advise and source the best option to meet your current and future needs leaving your confident that your home and family are well protected.