If you’re a little concerned about how to go about choosing mortgage insurance, you might find the following information points to be useful:
1. it’s worth starting out by realising that there may be several different forms of what collectively might be called mortgage insurance – some of these may be more suitable for your circumstances than others;
2. to make an informed decision, you’ll typically need to have a good look around to familiarise yourself with the various types available – fortunately much of this information may be available online now through insurance sites (e.g. Drewberry mortgage insurance);
3. one of the key questions you may need to think about will be whether or not you wish to cover a single risk (e.g. your premature death before the mortgage is paid off) or several, including things such as redundancy or illness that stops you from working etc;
4. you may also need to ask yourself whether you believe short-term cover of your monthly mortgage payments for a specified period is what you require (this is sometimes called mortgage payment protection insurance) or full mortgage payoff (mortgage life insurance);
5. in practice, your degree of freedom to choose may sometimes be constrained because some mortgage lenders may require, as a condition of lending, that the loan is fully covered by mortgage life insurance – though in most cases they are no longer allowed to insist that you purchase it from them as a condition of advancing your loan;
6. it might not be unusual to find that some property owners with a mortgage may have both forms of what they may call mortgage insurance – to pay off the mortgage in the event of premature death or/and to cover mortgage payments in the event of misfortunes such as sickness or redundancy etc.
7. insurance that covers payments may, as you might expect, bring with it certain conditions – for example, only involuntary redundancy might be covered and not voluntary redundancy, resignations, some forms of dismissal or career breaks etc;
8. in the case of mortgage cover for sickness and critical illness etc, the policy may typically exclude pre-existing medical conditions. In other words, you may not be able to insure yourself against the risks of something that is, in effect, already known to have happened to you;
9. some insurance providers may require that you have a medical in certain circumstances and others may have it as a standard requirement;
10. you might also see a qualifying period with such insurance, before claims may be made. This may be relatively commonplace and is not an indication that you are being singled out;
11. some policies may have upper age limits, though in such cases, you may find that alternatives such as whole of life insurance cover, may be suitable to protect any residual mortgage debt you might have.