insurance

Mortgage Related Assurances

There are many different forms of life cover that are available in the market place at present. Here, our concern is with the type of cover most suited to the house buying process.

This page is for information purposes only and is intended solely as a guide for prospective buyers to provide you with a general insight. It is not a recommendation to buy.

Term Assurance - This type of cover is for a predetermined period of time or term, usually to cover the term of the mortgage. It has several different facets, all of which are designed to pay a lump sum benefit. These benefits can pay either level term or decreasing term and which you chose would depend on the type of mortgage you have selected.

The most common facets are: ·

	Death Benefit
	Critical Illness
	or Both

This type of policy is designed to provide cover in the event of death or illness of a party to the mortgage contract. There is no money issued should you survive the term without illness or death. It is not an investment that will provide a return to you at the end of the term; it is for peace of mind purposes only. The premium will vary for every individual, however the younger and healthier you are the cheaper the premium tends to be.

Death Benefit (DB) - This pays a lump sum to a beneficiary at death of the person insured. This is often taken to provide for the persons left responsible for the property after death, such as a partner or family member, or someone that has acted as a guarantor against the loan from the mortgage lender. It is sometimes insisted upon by the lender as a clause to issue the monies to your solicitor. This is to ensure that they will have their money protected in the event of the worst happening.

Assignment used to be very common but is becoming less frequently insisted upon, in general. It is still advisable to take life cover even if you are the sole party to a mortgage, as circumstances have a habit of changing as family life and responsibilities grow. Even if this is not the case, you may wish to leave the property as an unencumbered debt to a loved one. All of which this type of policy is designed to cope with; this is often the cheapest form of life cover you can buy.

Critical Illness Benefit (CIB) -This type of policy was introduced to compensate for the lack of adequate cover should you become diagnosed with a critical illness or a total and permanent disability, which can in some cases have a worse effect on a family than death. It also affects you directly and not just your survivors. The good news is that advances in medical science have meant that the chances of surviving a critical illness are greatly improved.

However, this doesn't necessarily mean that you will be able to return to work and state benefits aren't sufficient to compensate. Even if they were it would give you very little time to convalesce and you most certainly would not be able to carry out your usual activities to the same extent.

There are other concerns, such as the cost of alterations to the property should you, for example, need to fit wheelchair access to the property. Again, this type of policy is there to provide peace of mind to you, knowing that, in the worst-case scenario, you and your family will be provided for.

This type of policy is more expensive than straightforward DB but then, as you are four times more likely to contract a Critical Illness before the age of 65 1, it is more likely that you will make a claim under this type of policy.The lump sum that is provided under this type of policy can be used for any purpose. The most common are: to clear your outstanding mortgage debt; to invest to provide an income for your loss of earnings; to cover your medical expenses. If you have a combined DB&CIB policy (often cheaper than two stand alone policies) then it will only pay the lump sum on a first claim basis, thus if you suffer from a critical illness and survive the DB part will become null and void and you will have to buy a new policy.

Other types of cover

These types of insurance are related to loss of earnings and are often termed Mortgage Payment Protection Insurance (MPPI). These also fall into two categories:

	PHI - Permanent Health Insurance
	ASU - Accident, Sickness & Unemployment

Both have similar functions but provide different levels of cover.

PHI - This is one of the most beneficial policies you can select due to the consideration that you can choose a lengthy term to cover any loss of earnings during that period. You can also make as many claims as you need to during this period without having to apply for a new policy.

As you can imagine, the likelihood of a claim on this type of policy is much higher than the previous mentioned insurances as you are covering yourself against accident and sickness preventing the ability to work.

The policy is designed to compensate against the inadequacies of employer and state provisions, which are available but are often limited in amount and applicable only after certain provisions have been met, and of course they also have a finite level of availability.

However, you will need to note that there are set levels of insurable income as, if you could provide cover that is equal to or above your current income, then there would be no incentive to return to work. As such, state benefit and other cover have to be considered when assessing the level of benefit to select from this type of policy. These types of policy are not available to all occupations for further information on this or any other policy then please contact us.

ASU -This policy is available to all and is a cheaper version of PHI, the main difference being there is a set limit to the length you can claim on this policy, no more than 12 months. As well as covering you for being unable to work due to accident and sickness the policy also covers you if you are made redundant from work.

An ever more attractive facet of income protection given the volatile nature of today's workplace. ASU policies can be used to extend the deferred period of a PHI policy, because this will make your monthly premiums cheaper as it is less likely that you will place a claim. Other considerations Ultimately, the final insurance you have to consider is that of your home insurance. The lender will insist that you at least cover the rebuild cost of your property, due to the fact that this is what your mortgage loan has been secured against.

The items you keep inside the property are of little concern to the lender. However, you are more likely to be upset if something were to happen to them. You will always get a discount for buying a combined buildings and contents policy.

What to do now

Go to the contact page and fill in a few simple details and a representative will contact you at a time to suit you, in a manner to suit you.

1 One in four people aged 20-40 will suffer a critical illness before aged 65. (source OPCS statistics)

The overall cost for comparison is 7.1% APR. The actual rate available will depend upon your circumstances. Use our contact page for a personalised illustration. APR variable and based on a usual case. Our fee will depend on your circumstances, minimum fee charged is £395 our maximum is 1% of your mortgage this may be added to your remortgage advance. Early repayment charges are likely to apply. They will vary depending on the mortgage you choose.

Think carefully before securing other debts against your home. Your home may be repossessed if you do not keep up repayments on your mortgage. H2ms is a marketing division of Heather Homes Ltd, Registered office Fishbourne, Chepstow Road, Newport, South Wales, NP19 9EZ. Registered in England and Wales: Number 3921132. Heather Homes LTD are authorised and regulated by the Financial Services Authority (FSA).