Should I Get Mortgage Protection Insurance or Life Cover?

Mortgage protection insurance can offer the certainty that should the worst happen to you, you and your loved ones will always have somewhere to call home.

At Dialdirect, we don’t offer mortgage protection insurance as a standalone product. However, we do offer various life cover options that can be used to cover any outstanding mortgage. If you’re wondering about the differences between mortgage protection cover and life insurance, we’re here to help you understand it all a bit better.

What is Mortgage protection cover? 

This type of insurance is designed with one purpose in mind – to pay off an outstanding home loan only. If the person who holds the policy can no longer make their monthly repayments, a mortgage protection policy will payout. This could be because that person becomes permanently disabled and can no longer earn a living, falls severely ill, or they pass away. It lasts as long as the policyholder pays the monthly premiums and for as long as the home has an outstanding home loan on it. As soon as the house is paid off, mortgage protection cover becomes redundant. There are, however, other means of securing your home loan with a life cover policy, which makes mortgage protection insurance unnecessary. 

How is life cover similar to mortgage protection? 

Life insurance cover has multiple purposes and a payout can be used in any way the beneficiaries choose. Dread disease cover and disability insurance can be taken out in addition to a basic life insurance policy to cater for almost any scenario where the policyholder is no longer able to support their dependents. Life insurance can also be taken out for a person’s entire life – it doesn’t necessarily stop or become voided when a person reaches a certain age or if the home is paid off. At Dialdirect, we offer the Pure Life Cover policy that pays out after a successful claim no matter what age you are. So, you would be able to pay off an outstanding home loan, if you had a life policy with Dialdirect. 

Find out all you need to know about mortgage protection cover in our FAQs below.

5 Common FAQs about mortgage protection & life cover

1. Does Dialdirect offer mortgage protection insurance?

No. We don’t offer mortgage protection insurance as a standalone product. However, we have other insurance options that fulfil the same function that this type of cover would, like life cover. If you’re concerned about your family’s overall financial welfare and, more specifically, how your home loan would be repaid, you could consider a life policy. If, on the other hand, you’re more concerned about disability or dread disease, which would disrupt your monthly repayments, you could take out disability cover or dread disease cover. These will pay out a lump sum that you can use towards paying off your home loan should you become disabled or be diagnosed with a severe illness.

2. Will my mortgage protection insurance premiums increase?

Maybe. While we can’t speak for insurers who offer mortgage protection cover, there may be a premiums increase. However, if you plan to pay off your outstanding mortgage with life cover should the worst happen, you can expect your life insurance premiums to increase annually. That’s because the older you get, the more likely it is that a claim will be made on your policy. This makes you riskier to insure with each passing year. Find out more about the factors that affect your life cover premiums. 

3. What are the benefits and shortcomings of mortgage protection

cover?

Mortgage protection policies are limited as they only pay off outstanding home loan amounts. The benefit is not having to worry about nominating beneficiaries because the policy usually pays out directly to the bank that holds your home loan. This way, you know the payout money will be used for what it was intended. 

The main disadvantage is that these types of policies can only be used to pay off one type of debt – you and your loved ones can’t use the payout to cover any other urgent debts. With a life cover policy, you can use the payout to pay off the mortgage and other debts. You can also usually take out a much higher cover amount with life insurance than you can with mortgage protection insurance.

4. Is mortgage protection insurance a legal requirement?

No, you aren’t obliged to take out mortgage protection insurance, although some banks do offer you this cover when you take out a home loan with them. However, we recommend you take out some kind of insurance that will help you or your loved ones pay off your home loan should you pass away or be left in a situation where you can no longer make the monthly repayments.

5. What’s better: mortgage protection or life insurance?

The answer to this depends on your personal circumstances. At Dialdirect, we believe our life insurance products are an invaluable form of cover that helps make certain you and your family will have a roof over your head no matter what the future holds. Our life insurance, dread disease, and disability insurance policies can be used to cover your outstanding mortgage and so much more – pay for groceries, medical bills, school fees, credit card debt, home renovations – anything you or your loved ones will need to maintain your current standard of living. 

Get a life cover quote from Dialdirect

Secure your family’s future and give yourself peace of mind with a comprehensive life cover policy. Ensure that your home loan and debts are settled in the event of your passing, or through disability. Get a life insurance quote online for your convenience or contact our offices to speak to a consultant to discuss your options. 

Sources:

[1] Investopedia: Why you don’t need mortgage life insurance 

Disclaimer: Dialdirect Insurance is a licensed non-life insurer and financial services provider. Terms and Conditions online. Long-term insurance policies are underwritten by 1Life Insurance Ltd, a licensed financial services provider and life insurer