Home loans are, for most people, the largest loan they will ever take. It is also likely to be the loan that takes the longest to pay off, running for a term of up to 40 years. While it’s a commitment worth making for those who want to become homeowners, it is impossible to know how our lives will evolve over such a long period of time. That’s why it’s important to have the right life insurance in place to cover your home loan.
What is home loan protection insurance for?
Home loan protection insurance covers you for the full amount outstanding on your home loan in the event of your death. In certain circumstances, this life insurance will also cover you if you suffer a permanent disability that means you are no longer able to work. The policy would need to be pledged to the home loan provider so that any outstanding amount is paid off directly by the insurance.
How does home loan protection insurance work?
When you secure a home loan to purchase your property, your life insurance will cover the entire outstanding amount of the loan. You will pay regular premiums to maintain the cover. Generally, there are two types of life insurance that you can opt for, one where the amount you are covered for decreases as the amount outstanding on your mortgage also declines and the other where the amount you are covered for remains the same throughout the term of your home loan.
Depending on the type of policy you take out, once your home loan is fully repaid, the insurance policy may also come to an end or indeed may continue, providing ongoing life coverage. There is no investment element to such policies so you will not receive any money back should you repay your home loan in full or reach the end of the term.
Why is home loan protection insurance important?
A lot can happen over a 40 year period and there are no guarantees that we will live that long. Home loan protection insurance gives you the peace of mind that comes with knowing that if you or, in the case of a joint policy, your partner, pass away or suffer a life changing disability, your family can continue to enjoy the property they call home.
Do I need any other insurance?
Yes, apart from home loan protection cover, you will also need building insurance cover to secure a home loan. This protects you from potential damage to the physical structure of your property and may also cover permanent ‘fixtures and fittings’ such as baths, fitted kitchens, windows and doors. Buildings insurance cover will need to remain in place throughout the term of your home loan. You may also want to consider taking out a contents insurance policy. While such a policy will not be required by a bank to secure a home loan it will offer cover for personal items of value which may be stolen or lost in the event of damage to your property as a result, for example, of water or fire damage.
Making the process of buying a home easier
Buying a property is a big deal. To make sure you find a home you love and can afford, do take the time to understand all the implications that come with taking out a home loan. If you would like to discuss what options are available to you in your current financial circumstances, feel free to contact MeDirect’s home loan experts by completing the ‘Request More Information’ contact form available here on our website.
MeDirect Bank (Malta) plc, company registration number C34125, is licensed by the Malta Financial Services Authority as a Credit Institution under the Banking Act 1994. Applications are subject to the Bank’s lending criteria. Terms and conditions apply and are available on request.
