Mortgage Protection: What if you’re unable to make Mortgage Payments

So you’ve secured your mortgage and it’s all systems go to get your extension underway, but have you considered how to protect yourself if you become unable to make mortgage payments?

That’s the thing that sits in the background for the time when something happens that you couldn’t predict and you are unable to make your mortgage payments. But there could be different reasons and one cover doesn’t fit all. There are different products for different purposes.

Why would you be Unable to make Mortgage Payments?

There are a number of reasons why you could be unable to make mortgage payments.

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Critical illness

There are defined illnesses that you can protect your self against. Illnesses such as heart attack and cancer fall into this category. Your policy will list illnesses that fall under this category.

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Loss of income

Those illnesses or accidents that prevent you from working because you are incapacitated would fall into the category. Again, policies will include details on what is included and what isn’t in this definition. Being made redundant wouldn’t fall into this group and it’s unlikely that if you’re injured taking part in high adrenaline sports like motorsport or activities like bungee jumping or parachuting would be included.

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Life

Quite simply, dying is included in this definition. Again, there will be stipulations and suicide is unlikely to be covered, or death through your own negligence.

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Business

The wellbeing of your key staff and business partners could fall into this area, as well as critical illness.

Mortgage Protection: your options if you’re unable to make mortgage payments

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Critical illness cover

As the name suggests, this protects you in the event that you contract a defined critical illness. Illnesses such as cancer and heart attack fall under this product. When you purchase this product it is vital that you declare everything that you know about your health. The level of cover and cost will depend on your family history and current health. It may also consider your job.

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Loss of income protection

Another product in the mortgage protection family is income protection. Income protection replaces your income in the event that you are incapacitated through illness. Income protection will typically payout after a defined period until you retire, return to work or die. You won’t get a payout if you’re made redundant.
Insurers can sometimes react to events in different ways depending on your policy.

Find out how insurers have reacted to the Coronavirus Pandemic here

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Life cover

Most people know what life insurance is. Most lenders will check that you have it in place when you take out a mortgage with them. It pays out a sum of money in the event of your death. But there are different variations of cover to ensure that the policy matches the mortgage that you have taken out:

Level Term will pay out a level sum of money. This is paid to your family, or nominated person in the event of your death.
Decreasing Term As the name suggests, the payout made on death reduces in line with your current mortgage.

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Business Protection

If you’re a company director, a partner in a business, or sole trader there are options for you to consider to protect your it. Not only can you protect yourself and your family in the same way as you would for mortgage protection. But you can protect your business against the loss of key employees to ensure business continuity.

Our Top Tips

Do your Research.

Whatever policy you take out whether that’s only one, or a package of mortgage protection, you will have to provide information on your health. That is likely to include serious illnesses that you have suffered in the past, possible injuries, and any treatment that you’ve had. You should also have details of your family history to hand. Insurers will consider the risk based on your health, and the health of your family. If you have a history of cancer or heart attack in your family, for example, they will want to know about it. And remember, withholding this information could mean that any claims you make in the future could be refused.

Balance the risk against the cost.

No one wants to pay for insurance, and it’s something you have that you hope you never need. But if we’ve learnt anything during the Coronavirus pandemic it’s that you can never be sure what’s going to happen in the future. If you’re confident that you can afford your mortgage payments if something happens to you then that’s fine. But if you’re not, setting up the correct mortgage protection policies in the event that you are unable to pay your mortgage will be cover that you’ll be pleased you’ve got if you need it. And remember, if you die, your family will be left to pick up the pieces if you aren’t covered, and that could mean losing their home at a time when they’re at their most vulnerable.

Speak to a Mortgage Protection Adviser.

Of course, we would say this! But a good mortgage protection adviser can help you work through all of the information that insurers want to see and take this to the market to put together your options. They have access to the whole market including some products that you may not have access to as a consumer, and they have all the knowledge and experience that you need to draw on to find the best mortgage protection products to meet your own set of requirements.

Our Final Word

This is a really important area to consider, and we can’t stress enough that you should be looking at protecting your home in the event that you’re unable to make mortgage payments.

Most lenders will support you and offer as much assistance as they can if you find yourself struggling, but ultimately the responsibility is yours. And if you are unable to make mortgage payments you might lose your home.