Mortgage life assurance is a life insurance policy which pays off any outstanding mortgage debt if the holder dies. It is a decreasing term policy, which means the sum you're insured for reduces in line with your mortgage.andnbsp; It should not be confused with mortgage payment protection insurance (MPPI), which covers monthly mortgage repayments if the holder is unable to work due to certain illnesses or an accident, or if they lose their job.
Mortgage lenders strongly advise all borrowers to have some form of life insurance in place in case they die before their mortgage has been paid off. This minimises the risk of their property being repossessed.
-It's worth considering mortgage life assurance if your partner could struggle to pay the mortgage on their own. It's a particularly important consideration to take out cover if you have dependant children. This will ensure they avoid the trauma of losing their home, as well as one of their parents.
-Mortgage life assurance costs an average ofandnbsp; 7.77 a month*. This is based on someone aged 25 taking out decreasing term insurance on aandnbsp; 100,000 mortgage being repaid over 25 years.
-Prices vary according to the individual policyholder's circumstances. The higher an insurance company thinks the risk of you dying is, the more you'll have to pay. As a result, smokers, older people and those with certain medical conditions can all expect to pay more.
Policies offering broadly similar levels of coverage for the policy outlined above range in price fromandnbsp; 5.08 a month toandnbsp; 16.04. Many mortgage lenders have tie-ups with insurance firms, or their own insurance arms, and may offer you cover when you arrange your home loan.
-If you live on your own, have no dependants and nobody you want to leave an inheritance to, you may decide you don't need cover. For those with partners and families, life assurance can offer peace of mind. If you're weighing up the pros and cons, consider whether you have other financial products that would enable your family to continue to comfortably pay the mortgage if you died. You may already have a standalone life insurance policy, savings and investments that would cover any outstanding debt, or death in service benefits from a company pension scheme.
-As with all financial products there are variations between the different policies on offer. Some will pay out while the holder is still alive if they are diagnosed with a terminal illness.
Others offer so-called accelerated critical illness cover, where they will pay out on diagnosis of one of a number of predefined critical illnesses, such as a heart attack, cancer or a stroke.
-As with all financial products it's worth checking you're currently getting the best deal on your current policy.
If it's several years since you first took out a policy, you may find premiums for a new policy are more affordable now than they were back when the market was less competitive.
If you do decide to switch policies, make sure your new cover is in place before you cancel your old one. Try not to leave yourself exposed to a period without life insurance.
(based on data from financial information group Defaqto)

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