The ongoing - and intensifying - cost-of-living crisis is likely to have taught you many things, and one of those will surely be how invaluable a thing it is to have a steady income. As our incomes come under ever-greater pressure, and in many cases will have barely kept pace with inflation, you might be anxiously looking over your long-term financial commitments, and you may be wondering what you can do to keep on top of them.
For this blog post, let’s focus on just one such commitment you might have: your mortgage. A recent monthly remortgage snapshot found that almost half of borrowers who did remortgage took on bigger loans that added hundreds to their monthly mortgage repayments.
You might have made the same decision that a lot of people with a mortgage have done: taking out a mortgage protection insurance policy. But given that this type of protection product only pays out a lump sum to cover the remaining mortgage debt if the homeowner passes away, you might worry that it’s not quite as broad a form of protection as you would like or need.
And do you know what could be an excellent broad protection product? Yes, that’s right: we’re referring to income protection insurance.
The relevance of income protection insurance to householders
Now, it’s probably important for us to point out at this stage that the term ‘mortgage protection insurance’ can be used in widely varying ways.
Some sources online, for instance, refer to it as a type of life insurance - in other words, it only pays out when the policyholder dies. But when you look elsewhere, mortgage protection insurance might be described more like a type of income protection insurance, whereby payouts occur during the policyholder’s lifetime in response to a specific event outlined in the policy terms.
So, let’s be clear about what we mean when we refer to “income protection insurance”. We’re describing a product that - if you were to become ill or sustain an injury and be rendered unable to work as a result - would allow you to receive a sum of money every month.
You can probably see, from the above explanation, where the name “income protection insurance” comes from; this is a type of protection insurance that effectively ‘replaces’ your income. Bear in mind, though, that payouts are typically limited to only a certain percentage of your normal income - up to 65%.
Still, even ‘just’ 65% replacement of your income could be a layer of protection you are exceedingly thankful for, particularly if you have a mortgage to pay off. And with recent statistics indicating that nearly a quarter of savers in the UK have already reached into their savings to cover their month-by-month living costs, you can probably see just how grateful you would be for an income protection payout as you look to keep on top of a wide range of areas of expenditure.
Like your usual income, the monthly payouts from an income protection policy can be great for covering all manner of costs you have during the month. So, it could be well worth taking out such a policy as the cost-of-living crisis gets tougher and tougher.
We’re available to give you free, no-obligation advice and guidance
Would you like to become clearer about your options when it comes to protection insurance, and even receive a competitive quote, without any obligation to purchase? If so, simply give our UK advice line a call today, on 0800 316 6917. We’ll help ensure you are pointed firmly in the right direction when you are looking to manage your household’s financial responsibilities and risks.