27th August 2020

Mortgage protection explained

Mortgage protection is one of the most sold life insurance products there is, in my experience it is the most common product I see clients with. This doesn’t necessarily mean it is the best product or most important product for you to have.


Basically what mortgage protection is, is a product that would pay your mortgage off in full If you were to die or become diagnosed with a critical illness during the term of your mortgage, hence the name “mortgage protection” it protects your mortgage debt. 


One thing that many people forget about their mortgage is that it is a huge lump of debt. A lot of people don’t even see it as a debt as they just consider it a means to get the house that they want to live in. Whereas in reality it is more than likely the largest amount of debt most people will ever take on. It always baffles me when people take out car insurance just because it law on a vehicle that may be worth £5,000 or £10,000 or £15,000 yet don’t want to spend 30 or 50 or £100 per month on protecting a debt of £100,000 or £200,000 or whatever it maybe. I can’t quite see the logic here, cover a vehicle just because you have to yet when you have the option to protect a debt 5, 10 or 20 times the value they don’t want to part with a small amount of cash each month. 


When you add to that the fact that, one in two people get cancer in their lifetime and everybody dies, I really struggle to understand why some people do not have mortgage protection. 


The repossession process, again I’m not quite sure many people understand this, to the best of my knowledge and in most cases if you miss three mortgage payments the bank will more than likely start the repossession process to take that house from you and force you to sell it in order to get their money back for the loan. If the family does get into financial difficulty due to illness or death the last thing you would want to be worrying about is money and paying back the bank. Now heaven forbid that a family member was really ill going through treatment and you then get kicked out of your house by the bank because you couldn’t pay the mortgage payments. This can have a huge effect on the children and the quality of life of the whole household. So having mortgage protection in place although it won’t ease the stress of illness or death in the family. It will ease the stress financially, as you will have a lump of money to either pay that mortgage off or part of it off and use the money for living expenses. 


I personally feel that mortgage protection should be mandatory if you take on a mortgage, it is better for all homeowners who use a mortgage to purchase and it is also better for all of the banks so they do not have to repossess people if they cannot pay the mortgage payments due to an illness or death.


I personally think that if you have a mortgage and you do not have mortgage protection in place you should consider speaking to a broker or specialist about your options and if it is available to you here at Bespoke we can discuss with your pricing options and T&Cs so you can make an informed decision and protect your mortgage.