Income Protection

Income Protection and Why You Should Have It?

Recent figures have shown that only two out of every ten mortgage holders have income protection, meaning that the UK’s homeowners are woefully underprepared to continue paying their mortgage should the worst ever occur.

Income protection is to all intents and purposes an insurance policy that will cover pay you a tax free monthly lump sum – which can be used for mortgage payments, bills, food etc – should you become unwell and signed off work by your doctor. Income Protection is there to reduce the risk of defaulting on your monthly repayments or running the risk of losing your home altogether. Income protection allows you to continue to make your mortgage repayments when you are no longer receiving a secure income and more importantly allows you the time to focus on your health.

Policies can vary in the level of cover they offer. Most policies will generally cover you in the event you become ill for a specified period and the majority will protect you ongoing until you are well enough to return to work or until the end of the specified term (please note not all offer this “un-limited facility – therefore its always best to seek professional advice)

Mortgage protection / Life Assurance for your family should you pass away

When a person dies, any existing debts – which will include a mortgage – do not disappear, and they are generally asked to be paid by the executor of the estate of the deceased. In all cases any debts must be settled prior to the distribution of any inherited wealth to noted beneficiaries.

Should this sadly be the case, a mortgage life insurance policy would pay out a lump-sum amount to enable your family to repay your mortgage in the event you were to pass away during the policy term, meaning your home, is no longer at risk.

This kind of protection is particularly popular with couples who have a joint mortgage as it prevents one partner being left with a sizeable debt that they may not be able to continue paying – especially if the partner that passes away is the predominant wage earner in the family or indeed if the lender now deems the mortgage unaffordable to the surviving applicant.

Another key area for concern is Buy to Let Landlords – sadly, many don’t realise that if they pass away, their hard-earned investment doesn’t become an asset to their remaining family but sadly a debt. By taking a simple life assurance policy to cover the mortgage debt, placing it into a trust to avoid it going through the estate, means that whoever the property was then intended for, will be left to them, potentially debt free.

In addition to covering the risk of death, we would also advise that an element of critical illness cover is in place. By introducing this added layer of protection ensures that should either partner suffer a ‘critical illness’ (the definition of which a qualified broker will be able to advise you on) then your mortgage payments will also be covered.

Director of Protection Sales at One 77 Mortgages, Katie Pisanu says: “Unfortunately we find the main reason for people not taking protection is that they deem the premiums to be too expensive. Sadly, it is only when an illness or accident strikes or when we lose a loved one that people realise just how valuable a multi-layered financial protection package can be.”

To find out more speak to an adviser on 01249 474959 or fill out the form below and we will be in touch