Gaining Cost-Effective Joint Mortgage Insurance

Many couples take out mortgage payment protection in order to protect their loan repayments from the risk of disability (often termed as accident and sickness) and unemployment. By splitting the sum insured in proportion to each partners contribution to household income joint mortgage borrowers can gain the most cost-effective loan protection.

Mortgage payment protection insurance (which is often taken out in addition to mortgage protection life insurance to cover the mortgage risk caused by death) pays out a monthly benefit to cover mortgage loan repayments should the plan-holder have to cease working due to accident, sickness or unemployment (which is defined as forced redundancy and does not cover voluntary redundancy).

With these plans each partner is able to insure up to 125% of the total monthly mortgage repayment (provided the total sum insured is less than 65% of gross earnings), with the additional 25% being used to cover other monthly household costs. With this option the entire mortgage repayment (plus an extra 25%) would be paid out by the insurer if either partner were to go off work. Although this option provides a comprehensive level of cover, for strict mortgage-only protection purposes there are much more cost effective options.

Firstly, to bring the monthly premiums down the couple could just insure the monthly repayment without any additional cover for other costs. Secondly, rather than insuring the entire repayment each the couple could take out a joint plan whereby each partner is insured for their contribution to the total monthly loan repayment, which is often proportional to each partners contribution to household income.

With joint mortgage payment protection the loan repayments would be covered in full but the benefit is simply split between each partner, thus lowering the monthly premiums. Naturally, if both partners are off work at the same time the policy would payout for each partner, totalling the full monthly repayment.