Beef up your mortgage life policy with a cash back option
How much premiums will you pay over the years?
If
you have a monthly premium of £25:
Yearly
premium = £25 x 12 = £300
If
your cover is for 25 years, then:
Total
premiums = £300 x 25 = £7,500
This can help fund:
- A major renovation on your home (which will suffer some degree of depreciation after 25 years)
- Part of your retirement
- A dream vacation
- Pay off the remaining few installments in the mortgage so that it is fully paid earlier than scheduled
In most cases, when you have a mortgage life insurance policy, the coverage ends when your mortgage ends, and that’s the end of it. This means that you don’t get to take back any of the premiums you paid, even when you survive the coverage period without any claims.
However, with a small additional cost, you can opt for the full refund feature included in most mortgage life insurance policies. This enables you to get your premiums back when the coverage period ends without any claims on your part.
Please remember that the premium payments are there to ensure that you have insurance protection in case you die before your mortgage is fully paid up. But given that mortgage life insurance is invariably term insurance, there usually will be no cash build up.
Mortgage life insurance with return on premium option: is this a viable choice?
The fact is, less than 5% of term life policies (including mortgage life policies), end in a claim. That is why the term covers are priced very affordably. You can see the premiums you paid in two ways:
- As money going down the drain when you don’t make a claim
- As a “rental” fee on the coverage and money well spent
If you are the type that sees the premiums as a potential loss in the future, then a mortgage life insurance with return on premium may be worth some consideration. However, a Return on Premium rider (which is rarely available on mortgage life policies) may add 30% to as much as 50% to the premiums. You can consider investing this money somewhere else where it can earn more attractive returns.
Cash back offers
Cash back offers are usually provided by online insurance brokers who “give back” some of the premiums in the form of “cash back”. Of course, this is not a full return of the premiums, but it provides considerable savings.
However, before you sign up, it’s best to check whether the premiums offered are competitive and that it makes sense to go for that policy.
Latest update: 17.06.2013
Get your mortgage life insurance quote now, fill our form on the right.
Other sites: critical illness cover, lifeassurance.org.