Why you should protect yourself when taking on a mortgage

Category: Mortgages&News&Protection

Have you ever wondered what would happen if you were to suddenly lose your income? If you’re the main or only earner in your household, you may struggle to keep up with your mortgage payments.

One side effect of the pandemic is that it has shone a light on how vulnerable to shocks many people really are. Protecting yourself can be invaluable when you’re paying off a mortgage, so read on to find out how this could help you.

Having protection can help you to overcome unexpected disruptions

Planning for the unexpected is important. While nobody likes to dwell on the possibility of accident or illness, preparing for these shocks can help you to overcome them.

A report by Royal London found that the decision to explore financial protection products is typically made at a life milestone, with buying a house being one of the biggest triggers for doing so.

This isn’t surprising, since a mortgage is likely to be one of the biggest financial commitments that you make in life. That’s why it’s important that you protect yourself from disruptions whilst paying it off.

It’s important to find the right form of protection to suit your needs

If you have financial commitments and are concerned about the effects that disruption can have on your life, you should consider some form of protection.

There are several different types of protection to consider, and so it’s important to find the one that best suits your needs.

One of the most common and useful is income protection.

If you are unable to work due to accident or illness, income protection will pay you a monthly amount, which is typically equal to around 60% of your salary. This can be a useful for ensuring that taking time off doesn’t affect your ability to keep up your mortgage payments.

It also has an “excess” period before you receive any benefit, which is usually between 4 and 16 weeks. This means that if you choose an eight-week excess period, you will have to be off work for at least eight weeks before your protection starts to pay out.

Depending on your policy, your claim will typically be paid for a fixed period, usually 6 to 12 months. This can give you peace of mind to know that you and your loved ones won’t have to struggle financially if you suffer an accident or illness.

Similarly, critical illness cover can be another useful way to protect yourself financially.

It will pay you a lump sum if you are diagnosed with, or need treatment for, one of a list of serious illnesses which are covered by your policy. Most cover heart attacks, strokes, and most forms of cancer.

As the pandemic has taught us, illness can strike at any time. That’s why it’s important to protect yourself so that you can mitigate the effect it has on your life. You can use the payout sum to cover any outstanding debts, such as a mortgage, so that you have one less thing to worry about when you’re focusing on your recovery.

These two forms of protection can both be invaluable in helping you to overcome any illness or accident that may threaten your financial wellbeing.

Life insurance can protect your loved ones if you were to pass away

While nobody likes to dwell on the thought of death, it’s best to prepare for all eventualities, which is why you may want to consider getting life insurance.

This can be particularly true for younger adults. According to a recent study by Legal & General, around two-fifths of millennials with joint mortgages have no life insurance in place. Of these, a third also admitted that their partner would not be able to keep up with mortgage payments if they were to pass away.

Life insurance is an invaluable way to protect your loved ones if the worst were to happen. Two of the most common types of life insurance are:

  • Level term assurance: This policy will pay you a lump sum if you pass away during the policy term. You may want to match the term with the end of your mortgage payments, so your partner and family would not have to pay it alone if you were to pass away.
  • Decreasing term assurance: With this policy, the payout sum decreases over time, which makes it ideal for a repayment mortgage. Since the value of the payout decreases, it is typically cheaper than level term assurance.

Life insurance can be a great way to make sure your loved ones don’t have to struggle with mortgage payments if you were to pass away. If you want to protect your family but aren’t sure which type of protection is right for you, you may benefit from speaking to an adviser.

Get in touch

Getting the right protection can be invaluable for your financial security and peace of mind. If you aren’t sure which type of protection is right for you, we can help. Email us at office@verve-financial.com or call 0330 320 5048.

How about a chat?

We’d love to have a chat with you over a coffee. To book a meeting or find out more, fill in the form and we’ll get back to you.