If you are in the market for a new home you have probably heard the term mortgage payment protection cover. You have probably also heard about income protection insurance. Due to the sheer number of insurances thrown at clients when purchasing a mortgage it can be difficult to know what they cover for, and if they are even necessary, or useful.
Finding the right insurance will depend on what kind of cover you want. If you are looking for an insurance that will cover your mortgage in case of sickness, injury or unemployment, then a mortgage protection cover plan could be what you need. But, doesn’t income protection insurance do that also? Let us look look a little closer at these two types of cover, and see what they do, and don’t do for you.
What do they cover for?
Mortgage Payment Protection provides cover for your mortgage. If you fall ill, lose your job, and cannot afford your mortgage payments this policy will make sure they get paid. It is a good idea to have some kind of safety net to protect your home in case you lose your source of income. The cost of this type of insurance will depend on the size of your mortgage and the specific cover you choose.
Income protection insurance is not mortgage insurance. It offers you cover on your income not on your mortgage. This means that if you lose your job, or your income is affected in a way covered by your policy your earnings are protected up to the amount agreed. You can use this money for anything you want, including mortgage payments. The expense of this insurance cover will depend on the level of income you wish to insure not on your mortgage.
What are they used for?
The main difference between these two types of cover is that payment protection provides short term cover, from 1-2 years, after which the borrower must find another way to pay for the mortgage. This generally provides adequate time for borrowers to restructure their finances, and either find an alternative income, or sell the house.
Income protection policies, on the other hand, can provide cover for loss of income up to retirement and beyond. One covers your mortgage while the other covers your income. Prices for these types of insurance are very different, and should not be considered as an alternative to each other. Choosing one or the other should be a decision you base on if you want your income or your mortgage protected.
If you think you could benefit from mortgage payment protection cover then you should contact a qualified financial advisor or insurance broker. They can provide more information and advice based on your specific circumstances.