Mortgage life assurance is an insurance cover that will pay out any remaining money owed on a mortgage if the owner of the mortgage dies. If you have an endowment mortgage, then this cover is included in the endowment most of the time, but it is worth checking to be sure what is covered. In some cases the mortgage company will insist that insurance is taken out to cover their loan, should you die before it is paid off.
How Costs are Calculated
The main influences of the cost of this assurance can be the size of the mortgage and the term. Therefore, the more money that you borrow and the longer you are borrowing it for, the more expensive it will be. However, they are also insuring the risk that you will die. This means that it will depend on your health, age and lifestyle. It is possible to reduce the cost of the insurance though, in a number of ways.
Reduce the Mortgage Amount
It is worth considering the cost of mortgage life assurance when you are buying a property. The more expensive the mortgage is, the higher the insurance will be. If you will already be struggling to cover the cost of the mortgage repayments, make sure that you will be able to meet the insurance costs as well. It is also worth considering having a higher deposit if you can afford it, as this will make the mortgage amount smaller and thus the insurance cheaper.
Reduce the Term
Consider whether you can set up the mortgage to pay it back over a shorter term. You obviously need to ensure that you will be able to afford to do this, as the repayments will be higher each month. However, the insurance will be lower.
Consider Joint Cover
It is possible that having joint cover will make the insurance cheaper. However, get quotes for single and joint cover and compare them, as it is not cheaper for everyone. It may depend on your ages, health and other factors too.
Give up Smoking
Sometimes risk factors such as health, occupation, smoking and risky hobbies are taken in to consideration when calculating the policy. Therefore consider giving up smoking and risky hobbies, be as healthy as you can and be sure to work a safe job if you want a cheaper premium. Be honest though because if you are not, then you may not get a payout if it is deemed you did not disclose necessary information.
It is well worth doing a cost comparison to see who has the best value for the money for their policies. It is good to do this when taking out the policy in the first place, but also regularly afterwards. It can be worth switching in order to save money. As age is a factor, you may find that once you have had the mortgage for ten years or more, there will be no benefit to changing policy as you will be seen as a higher risk to new insurers and this will increase your rates. However, checking regularly costs nothing and could save you money.
There are a number of things you can do to reduce your insurance cost. It is possible to get quotes for different circumstances and so you could work out how much you would save if you gave up smoking, for example and then decide whether it is something you should consider. You may also want to consider paying a lump sum of the mortgage or putting own a bigger deposit when you buy the property. Think about your lifestyle as well and whether you can make any changes that will have a significant impact on your insurance cost.