Threshold Mortgage Advice

Life cover mortgage or life cover family protection – which is right for me?

Life cover mortgage and life cover family protection both pay out money to your loved ones if you die; helping those you leave behind to meet their ongoing financial commitments.

Both types of policy can also be used to settle any outstanding balances on your mortgage, but despite their similarities, life cover mortgage and life cover family protection are two very different things and making sure you opt for the right kind of cover is critical.

This guide, created by our protection specialists, briefly explains the key differences between life cover mortgage and life cover family protection, so you can easily tell the two apart. If you would like to explore your options further, we highly recommend getting in touch with one of our qualified protection advisers who can assess your circumstances and help you to determine which type of cover is best suited to your needs.

What is the difference between life cover mortgage and life cover family protection?

The key difference between life cover mortgage and life cover family protection is that life cover mortgage offers a lump sum to clear your mortgage debt, while life cover family protection offers a lump sum that your dependants can use in whatever way they please.

Both types of cover only pay out when the person who is insured on the policy dies. If that person is you, it means that the money will only be released on the event of your death – so you won’t see a penny of it in your lifetime nor benefit from it personally – even if you’ve been the one paying for the policy.

However, that’s precisely what life cover is there for. It’s not to benefit the living but to provide essential financial support to any dependants who may rely on your income to afford household bills and other expenses after you’ve gone.

Life protection, therefore, can act as a financial lifeline to keep your loved ones afloat, helping them to continue to meet everyday costs such as energy bills, mortgage payments, and even essentials like food and clothes, when you’re no longer around to support them.

Is it better to get life cover family protection or life cover mortgage protection?

This question is a bit like asking if it’s better to get one flavour of ice cream over another!

The fact is everyone’s circumstances are different and that will influence whether life cover mortgage or life cover family protection is better for you. After all, you wouldn’t consider hazelnut to be a better option than vanilla if you had a nut allergy. The same goes for life protection; what suits someone else might not be the right fit for you.

That’s why it’s so important to speak with a protection adviser prior to committing to a policy. They can guide you through the available options and help you to weigh up what kind of life cover makes the most sense in your situation.

Let’s look at a couple of examples to illustrate…

Let’s say you’re single but you have a mortgage in your name, which you’re solely responsible for paying. You don’t have anyone who directly relies on your income, except for you. In this scenario it could make sense to plump for life cover mortgage protection.

While it won’t help you to pay the mortgage while you’re living, it could help ensure you are able to pass a mortgage free property to your beneficiaries on your death.

Now, let’s consider a different kind of applicant.

Let’s imagine you’re married with three young kids at home. You and your partner have a joint mortgage, but your income far exceeds that of your partner, so you pay the lion’s share of the mortgage and bills each month.

If you were to die unexpectedly, without life protection in place, your partner may struggle to afford to keep up with the mortgage repayments without your income coming in each month. Likewise, he, she, or they, may also find it difficult to afford the everyday essentials needed to get by, on top of things like fuel, gas, and electricity bills.

In this case, it would be essential to have life cover mortgage in place to allow your remaining family on your death to live in a property mortgage free. However, it would also be right to consider life cover family protection as your family will need money to meet ongoing living costs and any exceptional expenditure. The mortgage repaid and a lump sum in the Bank would be a much better position for your family.

When should I take out life protection?

When it comes to life protection, there’s no time like the present. Whether you’re single, living with a partner, or married with a houseful of kids, if you have a mortgage, it’s always a good idea to take out life cover. The younger and healthier you are, the less you’re likely to pay for your cover premiums.

To find out which type of life protection product would most benefit your circumstances, contact us us via our online form.

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