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Email: info@cheltenhamifa.co.uk

Mortgage Life Assurance is designed to pay off the remaining mortgage debt on repayment mortgages if you die within a set period. It ensures your dependents needn’t worry about repaying the mortgage if you die. Its full name is Mortgage Decreasing Term Life Assurance (MDLA). The reason it is ‘decreasing’ is because your outstanding mortgage debt, and therefore the potential payout, decreases over time.

Is it worth having?

Most lenders strongly recommend you get a policy when you take out a mortgage
It is useful protection and, if done correctly, should not be too expensive
Lenders will try to sell you their own policies, which may not be best value
We can research the market for you and find the most appropriate and cost effective policy for you

How Much Does It Cost?

It’s simply a case of the cheaper the better as MDLA has no investment element
The payment covers the balance of the mortgage and there’s no argument over whether someone has died
Always ensure the policy has fixed premiums (i.e. the amount you pay each month won’t change)
If you jointly own the home, get a quote for a joint policy which pays out on the ‘first death’ and compare this to the cost of separate policies

Costs depend on you

Policy costs increase with mortgage size and length as well as the likeliness of your death during the term
Age, sex and whether you smoke are big factors
If you’ve quit smoking, once you’re clean for a year, it’s worth a re-quote as the price may have reduced substantially

If you already have a policy and you have stopped smoking ask us for a re-quote, we may be able to reduce your premiums. Some MDLA policies also factor in health, occupation and participation in risky sports. So a 21-year-old, organic food eating, gym addict, who’s alphabetised their vitamin collection, will probably find their policy pretty cheap!

Consider writing in trust

If you die the life assurance forms part of your estate
This could mean your estate is hit with Inheritance Tax (IHT)
In many cases you can avoid IHT by writing the policy in trust – which means the payment goes direct to your dependents, avoiding inheritance tax
This is relatively easy to do as with most insurance policies they include the option (and papers) for writing in trust directly, at no extra charge

This article (What Is Mortgage Life Assurance?) is intended to provide a general appreciation of the topic and it is not advice. Guidance should be sought from a specialist who is qualified to advise in your specific circumstances.

For more information on this aspect of "life insurance - what you need to know", please contact Cheltenham Independent Financial Advisers Limited on 01242 269656 or email us at info@cheltenhamifa.co.uk. One of our advisers will be happy to assist you.