Mortgage Glossary: Mortgage Protection Policy

Mortgage Protection Policy

A mortgage protection policy is a pure life insurance policy with a decreasing sum assured designed to protect the remaining outstanding capital of a repayment mortgage In other words, it is decreasing term insurance.

Put another way, if you were to die, the lender would like to know that you have an insurance policy in place which will be used to immediately pay off your mortgage debt. That's very handy for them and sensible for you if you're leaving a partner and/or family behind who want to continue living in the property but perhaps wont be in a position to afford the mortgage repayments without you.

Bear in mind that whatever type of mortgage you have, you will need some kind of insurance policy in place to repay the loan in the event of the death of the borrower(s) during the mortgage term. You will not need a separate insurance policy with an endowment mortgage.

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See also: Financial Services, Mortgages