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The average mortgage in the UK is over £100,000, which
is usually paid back over a long period of time, up to 25 years.
Even with the longest terms, the monthly repayment will be in the
hundreds, possibly in the thousands of pounds.
Mortgages are secured on your home meaning that your house
will need to be valued. The mortgage repayments come out of the
income of the applicants for the mortgage. So if, for any reason,
you can't afford the repayments, your home will be at risk.
Mortgage Payment Protection insurance otherwise know as Accident,
Sickness & Unemployment insurance provides you with a monthly payment
for a specified period of time if you are unable to work because of
an accident, serious illness or are made redundant. This will enable
you to keep up repayments until you get back on your feet.
Should the person paying the monthly repayments die, there
may be no way for the bereaved to keep up the mortgage payments on
the house. A potentially disastrous situation that could arise here
is that your dependents could lose your home. You need to take out
a life assurance policy to cover this situation.
Types of Life Cover
There are broadly 2 main types of life cover:
Decreasing Term - Decreasing Term - suitable
for use with a repayment mortgage as the level of cover will reduce
broadly in line with the mortgage balance. There is no surrender
value and premiums will be lower than for a level term policy, due
to the decreasing sum assured.
Level Term - most suitable with an interest only
mortgage as cover remains level with the mortgage over the term.
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