A mortgage need will arise when a customer needs to borrow on a long term basis, usually to cover the purchase of property. The amount of cover required will depend on the size of the loan required. The type of cover required will depend on the type of loan arrangement.
Where the loan is on a capital and interest repayment basis, the customer should consider putting a decreasing mortgage protection plan in place,
the lender will usually insist that level term insurance is put in place to cover the loan.
Decreasing mortgage protection will be linked to an interest rate. The rate chosen should be enough to cover the interest rate payable on the loan. The plan will usually be assigned to the lender and in the event of the death of the life assured the proceeds will be paid to the lender to clear the outstanding balance. Once the loan has been cleared any balance will be returned to the surviving plan owner or the estate of the deceased.
Most protection plans include a suicide clause: this means that in the event of a death due to suicide within the first twelve months, the claim will be declined. Where a protection plan is assigned to a lender, this suicide clause may not apply. You should check with the life assurance provider in terms of how this is applied.