Mortgage protection ensures that if you become unemployed or disabled through an accident or sickness so you are unable to work, your mortgage payments (or part of your mortgage payments) are paid for on your behalf.

The protection is available as a stand alone policy or as an 'add on' to many life insurance products.

Monthly premiums are payable which ensure that mortgage payments are paid on your behalf for a specified period, typically twelve months.

There is normally a waiting period of 60 or 90 days before a claim can be made. This helps to lower premiums.

The advantage of mortgage protection is that you can receive cover for being made unemployed as well as for accident and sickness preventing you from working.

You can chose the level of mortgage protection cover most suitable for your circumstances:

• accident, sickness and unemployment cover



• accident and sickness cover



• unemployment cover

As with term life insurance, mortgage protection can be provided as level cover or reducing cover. The most appropriate cover will depend on what type of mortgage you are protecting.

With 'reducing cover' the amount covered reduces over the term of the policy, in line with any outstanding mortgage payments. Hence, this type of cover is generally used to protect a repayment mortgage. It has the advantage of being cheaper, since the sum insured is constantly being reduced.

Alternatively, 'level cover' ensures that the amount of cover remains constant through out the period of the policy. This type of cover is therefore more applicable for interest only mortgages where the interest payable to the mortgage lender remains constant throughout the period of the mortgage. Some borrowers also prefer to opt for level cover with a repayment mortgage to ensure a surplus payout on death.

Inflation does not need to be considered with mortgage protection as the mortgage repayments being covered are not subject to inflationary increases.

Additional options and areas for consideration include:

• Maximum Mortgage Covered: check the maximum interest rate covered. Most protection policies only insure you for interest rates up to a specified percentage. If mortgage rates rise in the future you need to know that your monthly mortgage payments will be covered adequately.



• Waiver of Premium: if illness prevents you from working your monthly premiums are paid on your behalf for a predetermined period. Check your policy for the permissible period of premium non payments. more



• Guaranteed Premiums: guaranteed premiums ensure that the premiums remain the same throughout the duration of the policy term. Alternatively 'reviewable premiums' require the premiums to be reviewed periodically, typically every five years, meaning that premiums can increase dramatically following review.

The terms and conditions of policies vary, so make sure you understand the scope of the cover being offered before committing yourself.