Keeping a roof over your head

When taking out a mortgage there are a few different types of insurance you should consider:

-Buildings insurance

-Life insurance

-Critical illness cover

-Income protection

Buildings insurance

This is usually compulsory and a requirement of the mortgage lender. It protects you if something damages your home such as a flood, fire etc as it covers the cost of rebuilding your home should anything happen.

Life insurance

If you were to die during the term of your life insurance policy it could pay off your mortgage. There are two different types of life insurance:

Level term-This type of policy pays out a set amount you have chosen if you die during the policy term.

Decreasing term-This type will cost less than a level term policy because the payout amount will reduce over the term of the policy. This type of policy can be set up to reduce its payout at the same rate as your mortgage balance each month.


Critical illness cover


This type of insurance will pay out a lump sum if you get diagnosed with a serious condition such as cancer, or if you have a stroke. Each policy will have a list of conditions it covers along with a list of exclusions, so check these before you buy. The three main types of critical illness cover are:

Increasing cover-This is where both the premiums and payout amount rise in line with the rate of inflation each year.

Level cover-Premiums and payout remain the same throughout the policy.


Decreasing cover-This is usually the cheaper option but the payout reduces each month. Many people use this to follow their mortgage as it is repaid.


Income protection insurance


If you are made redundant, become ill or have an accident, income protection policies can pay you an income until you are able to work again. They can cover you for either a set monthly amount or a percentage of your income. Policies can last for different time periods, the longer the policy is the more expensive it usually is.