Mortgages/Finance

Associated Financial Protection When Undertaking Mortgage Planning

When taking on board what for most will be their biggest lifetime financial commitment, it is fundamentally important to ensure that a solid portfolio of protection planning is in place to cover you and your family. Otherwise, there could be severe financial consequences.

Effecting some or all of the insurance below should in our view be considered as important as, if not more than, protecting your buildings & contents.

Accident, Sickness & Unemployment (ASU) / Income Protection

A primary consideration is to ensure that, in the event of accident or illness preventing you from working, your ability to continue making your mortgage repayments and/or meeting your normal day to day expenditure is protected. The statistics evidencing long term absence from work are frightening (See Income Protection), easily countering the ‘it won’t happen to me’ approach often adopted and more than proving that this area of planning should not be one to gamble with. Accident & Sickness typically covers up to 12 or 24 months, and can be considered to be expensive. For this reason we prefer Income Protection insurance as a means of protecting against this eventuality. This offers the capacity to provide a greater level of cover, as this is linked to earnings rather than mortgage repayments and will continue payment of the benefit if necessary up to the selected retirement age.

For those that believe their own job security to be a little precarious and the opportunities elsewhere lean, unemployment cover may be considered. It must be borne in mind that most insurers will not cover any redundancy where prior knowledge of this at the time of application is evidenced.

Mortgage Protection

Protection of the family home is essential, thus ensuring that an untimely death does not leave a surviving spouse and potentially children with the burden of the mortgage. Providing such cover offers comprehensive financial security and immense peace of mind.

This type of policy has a decreasing benefit, reducing not by equal amounts each year but rather in line with the schedule of reductions of a capital & interest repayment mortgage.

These can be arranged on a life cover only basis, critical illness only basis or  combined life/critical illness, although it must be noted that a strange quirk of the market is that on many occasions, the combined cover can prove to be approximate to or even cheaper than that of critical illness insurance alone.

Additional Personal Life Cover

Whilst the mortgage may be protected, a further consideration should be life cover over and above that needed to repay financial liabilities. This can be put in place for a multitude of reasons, including covering household expenditure, childcare costs, private school fees, further and higher education.

For further information on financial protection planning, please visit our financial protection section.

Even the basic of requirements should not be taken lightly and we recommend that advice be sought wherever possible.