How to protect your mortgage

For many of us, a mortgage is the biggest financial commitment we’ll ever make. With large amounts of money and long periods of time involved, it’s important you feel confident about the agreement you’re signing up to.

But what happens if things change in the future? If you’re no longer able to work, suffer a terminal illness, or pass away, financial support might be required to cover the cost of your mortgage. This is when an insurance policy can make all the difference to you and your loved ones.

There are several types of cover that could protect you if the unexpected happens. In this article we explain the range of insurance options available, which include:

• Mortgage protection
• Life insurance
• Critical illness cover
• Income protection

What is mortgage protection?

Mortgage protection covers the cost of your mortgage if you can no longer afford to make payments. This could be due to you experiencing:

• Illness
• Serious injury
• Redundancy

Also known as mortgage payment protection insurance (MPPI), this type of cover helps to protect you from defaulting on your mortgage. It can also help to avoid your home being repossessed, which can happen if you don't keep up mortgage payments.

Mortgage protection typically begins when you’ve been out of work for 30 to 60 days, but this amount varies from policy to policy. You start to receive a set amount of money each month, which you can use to cover your mortgage payments. Insurance providers set a maximum limit, which tends to be between £1,500 and £2,000 per month.

The cost of mortgage protection depends on factors such as your age, salary, and what the policy covers. Monthly premiums can start from £5, but normally cost somewhere between £10 and £40.

What is life insurance?

A life insurance policy supports your loved ones if you pass away. A lump sum is paid out, which can be used to cover the cost of living expenses, such as mortgage payments. When you take out a life insurance policy, you can choose two types of term:

• Decreasing term - With this option, the lump payout is meant to cover the cost of the repayment mortgage balance. As this decreases over time, it's seen as the cheaper option.
• Level term - With this option, the lump payout remains the same for the policy's duration. It might suit you if you have an interest-only mortgage and the loan value is not being paid off each month.

The cost of a life insurance policy starts from:

• £9.90 per month for a non-smoker aged 50 with a £100,000 decreasing term.
• £16.26 per month for a non-smoker aged 50 with a £100,000 level term.

What is critical illness cover?

This type of cover pays out a lump sum if the policyholder is diagnosed with a serious illness. This could be cancer, heart attack or stroke, but it’s important to note that different insurance providers have specific qualifying conditions and criteria.

Just as with life insurance policies, you can choose a decreasing term or a level term to suit your needs. The cost of a critical illness policy starts from:

• £63.20 per month for a non-smoker aged 50 with a £100,000 decreasing term.
• £89.03 per month for a non-smoker aged 50 with a £100,000 level term.

What is income protection?

This type of cover pays the policyholder a regular income if they can’t work due to sickness or disability. The amount is typically 50% to 70% of the normal income and normally lasts for one to two years. But there are policies that pay out for longer periods of time.

The cost of an income protection policy can vary significantly. But most policyholders pay about £50 to £70 per month.

How Saga Mortgages can help you

We partner with Tembo Money to give you access to award winning mortgage advice. Tembo Money can also provide insurance protection products for our customers. Tembo’s expert advisors will talk you through your options and find you products that meet your needs.

Saga Money may receive payment from Tembo if you get a mortgage offer via the Saga Mortgage Service. Tembo will also pay us an introductory fee if you take a protection product. This is paid directly by Tembo and will not impact the amount you pay for the service or the rates you receive.