What is mortgage protection?

What are the different types of mortgage protection?

There are three main types of protection:

• Life insurance

• Critical illness cover 

• Income protection

Below we explain these types of protection in more detail, including how they work and how they protect your mortgage

What is life insurance and how does it work? 

Life insurance pays out to a nominated person if you were to pass away at any point between the start and end dates of the policy. This allows your nominated family member to receive money after you die in order to help them continue to repay the mortgage. 

There are different forms of life insurance available: 

• Decreasing term - a decreasing term policy reduces in line with mortgage, which is usually the cheaper option.

• Level term - with level term, the amount covered is not reduced which can be a good option for interest-only mortgages as the debt won’t reduce until the end of the full term.

• Family income benefit - this is designed to pay out monthly sums to the family if the policy holder dies. It’s often paired with a decreasing or level term policy.

What is critical illness cover and how does it work? 

If you become critically ill, critical illness cover provides financial security by paying out a tax-free lump sum upon diagnosis of a specified illness such as cancer, stroke, or a heart attack. 

This support can help cover essential costs, including mortgage payments, allowing you to focus on recovery without the added stress of financial burdens. This type of insurance ensures that if a serious illness disrupts your ability to work, your home and your family’s financial stability remain protected.

This means you and your family will be financially supported if you are no longer able to work due to your illness. 

Similarly to life insurance, there are different types of cover such as decreasing term and level term. Family income benefit is also offered for critical illness cover.

Different providers may cover different illnesses, so it’s important to check what’s included in your cover before taking out a policy.

What is income protection and how does it work? 

Income protection is designed to replace a portion of your income if you’re unable to work due to illness or an accident. It provides financial support, helping to cover your living expenses while you recover.

Payments are usually designed to last for a set period of time, for example one or two years. But there are policies that pay out continuously in the event of long term illnesses. 

You can choose a deferred period that best suits your financial situation, considering factors like your sick pay or savings. The policy will start paying out after your selected deferred period ends, with options typically ranging from zero days up to 12 months.

Different providers will have different criteria for paying out. For example, many providers won’t cover you for illness or disability relating to pre-existing medical conditions. That’s why it’s important to get a policy that’s suited to you – speaking to an expert can help. 

How much does mortgage protection cost? 

The cost of mortgage protection can vary significantly depending on the type of insurance and the level of cover you want, along with your personal circumstances. 

Speaking to a protection expert about your needs and requirements is the best way to get an accurate quotation of what it will likely cost you. 

Is it worth comparing mortgage protection deals? 

Yes, as there are so many different options, it’s worth comparing different protection deals to find one that works for you.

But it can be difficult to know which will work best for your protection needs. That’s why it can be useful to speak to protection experts, who can search across the market to find a deal tailored to you and your circumstances.

If you take out a mortgage with Mojo, you’ll be offered the chance to speak to our protection team. Our experts can help make sure you’ve got the right level of protection for your mortgage.