We have recently reviewed mortgages executed and identified a worrying trend.

People choose not to insure themselves for unforeseen circumstances, yet they have insured their property and its contents. Realistically, what is the probability of having to claim on an insurance policy?

Let’s look at a case study. Based on a couple, aged 40, non-smokers taking a 29-year mortgage term, the following statistics apply during their mortgage term*;

• There is a 1 in 10 chance of one of them dying.
• There is a 2 in 5 chance (40%) of dying or suffering a critical illness.
• There is a 3 in 5 chance (60%) for one being off work sick for two months or more.
• There is a 4 in 5 chance (80%) of a critical illness, being off work for 2+ months or dying.

The stats are scary, and if either or both are smokers, then the probability increases.

There are mortgage protection insurance policies available to fulfil the following;

• Pay off your mortgage upon death.
• Pay off your mortgage upon diagnosis of a Critical/Serious Illness.
• Replace your income if you are unable to work in your own occupation.
• Give your family an income in addition to repaying the mortgage should one of you die or contract a critical illness.

These are difficult conversations, and we are all guilty of denial. But what would your family life look like if you were unfortunate to face one of the above challenges?

Hopefully, your employer may have some benefits for a period of time. What happens after this period, though? What would life look like if you didn’t have the cushion of an employer? 

There are state benefits, but these are limited, and it would be remiss for any of us to expect the state to cover us.

These are the problems, but what are the solutions going to cost? You can cover most risks, and the cost could be expensive as it depends on age, lifestyle, work, health and whether you smoke etc.

The best solution is to look at the cost to insure all eventualities and then compromise or remove the benefit you feel is unimportant to you. You will then find a plan which is ‘fit for purpose’.

As Independent Mortgage Experts, our first duty is to get our clients the best mortgage. Once we have done this, we openly discuss and research ideal solutions from many insurers to ensure our clients get the best coverage for the cheapest cost, protecting them from most unexpected scenarios. 

It is also vital you consider your future wealth and if there is any possibility of Inheritance Tax. We will review whether your policy should sit within a ‘Trust’, which will keep it outside of your estate for tax purposes.

For more information, please speak to one of our experts for a free review.

* The likelihood of each scenario has been calculated based on the Institute and Faculty of Actuaries’ Continuous Mortality Investigation (08 series assured lives mortality tables)