The value of mortgage protection in practice
Mortgage protection is all too often disregarded as simply another expense you can do without, and when you’re coming to the terms with the additional expense of a mortgage, you’d be forgiven for thinking this way. However, mortgage protection is a legitimate product which is worthy of careful consideration. Yes, it will add a small amount to the cost of your mortgage, but it will also provide the protection that, should the borrower die before the mortgage is repaid, the amount owing on the mortgage will be covered by the policy.
The following is an example of the value of mortgage protection insurance in practice:
Without mortgage protection insurance
Steven and Maria worked hard for twenty years to be able to fulfil their dream of owning a detached property on the coast of rural Ireland where they can bring raise their two daughters in a friendly and peaceful location.
To purchase their dream home they required the help of a high street mortgage provider, and borrowed 80 per cent of the home’s value. Although they knew their finances would be tight for the next couple of years, both Steven and Maria were in stable jobs where they were highly valued by their employers, which provided them with a good degree of security.
Steve and Maria were offered mortgage protection by their mortgage providers which they turned down. They decided to compare the mortgage protection rates they were offered by their mortgage provider with the policies they could find online, and despite finding improved rates, they opted not to take out cover.
They lived happily in their new home for three years, before one day, tragedy stuck. Steve was out walking the dog when he was struck by a car that was travelling too quickly through country lanes. He was killed instantly.
Maria and the children were inconsolable. They had lost a father and a husband who was in the prime of his life and enjoying the fruits of his labours. For months after his death Steven’s grief stricken family struggled to process their loss.
It was not until a couple of months later that Maria started to become concerned about the family’s finances. Despite Steven’s absence, the bills needed to be paid, and the mortgage that had been comfortable on both of their salaries, was now more than Maria could manage alone.
Without anyone to help the family out financially, Maria had to face facts: she was going to have to sell the family home she and Steven had loved so dearly. She had fallen into arrears with her mortgage repayments and could no longer make ends meet. Selling the family home broke Maria’s heart.
With mortgage protection insurance
Having researched online, Steven and Maria found a competitively priced decreasing mortgage protection policy, which pays a benefit that decreases over the term of the cover, in line with the decreasing value of the mortgage.
When the tragic accident occurred, the insurance company paid a cash lump sum which covered the remaining value of the mortgage on the property. Although distraught, at least Maria could focus on trying to come to terms with her loss without having to sell the family home she and Steven had worked so hard for.
Yes, mortgage protection insurance is an additional expense, but is it one you can afford to do without?