The importance of having mortgage protection


For many, the journey to owning a home is a significant milestone and the amount to be borrowed can be the biggest investment in most people’s lives. It’s marked by various checkpoints and during the excitement it’s crucial to address essential tasks, one of which is having mortgage protection in place.

Mortgage protection not only safeguards your new home or investment but also provides peace of mind for you and your family. It is a life insurance plan designed to cover the outstanding mortgage balance in the event of the policyholder’s death during the mortgage term. It serves as a safety net for both the borrower and the lending institution. Typically, lenders will not allow the drawdown of the money before the mortgage protection is in place.

Depending on circumstances, the plan can be set-up on a single life, joint life, or dual life. Most lenders offer to arrange your mortgage protection plan, but you are not obligated to take their offering. In fact, it’s advisable to explore your options in the market through a financial advisor to ensure you’re getting the best coverage at the most competitive rates. Taking time to compare quotations and consult with different insurers will lead to significant savings over the long term.

The process of putting a plan in place involves several steps, starting with obtaining a quotation. Then applicants complete a proposal form providing pertinent information such as age, smoking status, life-cover amount, serious illness required or not and loan term. The proposal includes standard medical questions which the providers underwriters use to assess (underwrite) the information provided to determine the terms of coverage.

The cost of a mortgage protection policy is influenced by various factors, including the applicant’s age, smoking status, coverage amount, and loan term. Most plans are issued on standard rates but, at times, dependent on medical and or family history, a loading may apply. These instances are relatively rare and only affect a small percentage of applicants.

Applicants with pre-existing medical conditions can still obtain mortgage protection, subject to an underwriting review. The decision depends on the severity and nature of the medical condition disclosed in the application. It’s essential to provide accurate and comprehensive medical information to facilitate the underwriting process and you should not second- guess the process and leave out something you might think is ‘nothing’ as the underwriters may see it as a ‘material fact’ and refuse to pay the claim due to non-disclosure.

Start early as leaving it to the last minute could hold up the whole process as you will need to allow ample time for underwriting and potential medical assessments. Start as soon as possible even before you receive the loan approval and having all necessary documentation readily available will streamline the application process.

Obtaining mortgage protection is a critical step in securing your new home and protecting your loved ones’ financial well-being. By understanding the process, shopping around for the best deals, and seeking professional guidance, you the borrower can steer through the complexities of mortgage protection with confidence and peace of mind.

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