Mortgage Protection Insurance, or Accident, Sickness & Unemployment (ASU) insurance are policies that cover specific payments. Whether you need one of these or more general life insurance depends on what you need the pay outs to cover. All types of insurance are optional, but you may want to consider the impact of your death, or your partner’s would have on the remaining person’s lifestyle and ability to care for your family.
One of the points we should clear up is that mortgage protection insurance is not the same as payment protection insurance (PPI). Where PPI usually covers unsecured finance and payments are made to the lender, mortgage payment protection insurance only covers mortgage payments and is paid directly to you. Mortgage protection insurance is usually taken out by people who want a policy that could help their family pay towards the mortgage, should the worst happen.
Accident, Sickness & Unemployment (ASU) covers a combination of these three things. You may have sickness cover from your employer but need to be covered against unemployment. A self-employed person may well need to be covered against accident and sickness. For the self-employed income protection may be something to consider as it protects a proportion of your income if you are unable to work for any length of time. Income protection is quite an effective way of insuring against ill health as you are medically assessed when taking out the policy and will know in advance what you will and will not be covered for.
Covering specific areas of your outgoings is worth considering if your partner would struggle to pay the mortgage without your salary but could manage other living expenses. But if your partner was taking a career break to look after young children, or earned only a small income, you might be better off with more comprehensive life insurance. You could then not only leave enough money to pay off the mortgage, but also make provision for your family’s ongoing financial security. We have looked at life insurance in more detail elsewhere this month.
Before you take out any new protection insurance, check what is available from your employer, or what state benefits may apply to you. Everyone’s circumstances are different, so you should take the time to consider the different options available. As always, I am happy to review your specific circumstances please get in touch if you need advice.
Income Protection (with no investment link) has no cash in value at any time and will cease at the end of the term. If premiums are not maintained, then cover will lapse.