Things you should know about Mortgage Life Insurance

Mortgage Life Insurance offers financial protection in the event of your early death, particularly important if you have family dependent on your income.

It shouldn’t be seen as just a mortgage life insurance policy however. It can also be a means of saving.

Some policies simply recompense your dependants in the event of your death, some help you to save and some do both.

Mortgage Life Insurance as a form of saving and protection

The long-term nature of mortgage life insurance allows you to make clear plans for long-term saving. Life insurance companies are experienced and successful investors (some more successful than others).

Optional Extras

Most life policies have optional extras:

Waiver of premium – If you cannot follow your normal occupation because of illness or injury, the insurance company will pay your premiums to maintain the benefits under the policy.

Critical Illness – This provides cover against the risk of you having a serious illness such as a heart attack or cancer. If you develop one of the illnesses listed in the policy a lump sum (or occasionally a regular income for a set period) will be paid.

Income Tax

Provided your policy is outside of a “qualifying policy” the benefits paid on death or maturity are not subject to income tax. To qualify, a mortgage life insurance policy has to satisfy certain statutory conditions. These include the need to pay premiums at annual or shorter intervals for at least 10 years or until your earlier death. Your sales person, adviser or insurer will tell you whether or not your policy is a qualifying one. The surrender of a policy within the first ten years may result in a liability to pay some income tax.