Understanding the Difference Between Life Cover and Mortgage Protection
In our series of understanding protection product differences, case in point, What Is The Difference Between Life Insurance And General Insurance & Life Insurance AT Time When You Least Expect, we can all agree that life insurance plays a vital role in providing financial security and peace of mind to individuals and their families. Today, we bring you two products that may appear similar but are different, life cover and mortgage protection. Regarding protecting your loved ones and securing your assets, two common types of insurance often come to mind: life cover and mortgage protection.
While they both offer financial protection, it’s essential to understand their differences and determine which one suits your specific needs. In this article, we will explore the distinction between life cover and mortgage protection, exploring their features, benefits, and how they can safeguard your family’s future.
Life Cover Explained
Life cover, also known as life insurance or term life insurance, is a type of insurance policy designed to provide a lump sum payout to beneficiaries upon the policyholder’s death. It offers financial protection and ensures that your loved ones are cared for in the event of your untimely passing. Life cover typically provides a broader scope of cover and can be used for various purposes, including income replacement, debt repayment, mortgage payments, education expenses, and funeral costs. It provides flexibility in how the funds are utilised, allowing beneficiaries to address immediate financial needs and plan for the future.
Reasons to consider life insurance
- Securing a Legacy: By ensuring your life, you can ensure that you continue to have a presence in the future of your loved ones, even in your absence. Whether funding education expenses or guaranteeing mortgage payments, you can provide ongoing support to your family if you pass away.
- Support in Difficult Times: Losing a loved one is emotionally challenging and brings about stress. Having life insurance in place means your loved ones can handle any outstanding debts or expenses and continue with their daily lives, alleviating some of their worries during such trying times.
- Flexible and Affordable Payments: You have the freedom to determine the amount of coverage you need and the duration of the policy, and if your circumstances change, it’s simple to adjust your policy accordingly. Start with a coverage amount that fits your budget, and make changes as needed.
Mortgage Protection Defined
Mortgage protection, on the other hand, is a specific type of insurance policy that focuses on safeguarding the repayment of your mortgage in case of unexpected circumstances such as death, disability, or critical illness.
Mortgage Payment Protection Insurance (MPPI) provides coverage for your mortgage repayments in the event of job loss or inability to work due to an accident or sickness. Typically, this insurance coverage lasts for a period of 12 months or until you can return to work, whichever occurs first. 
MPPI is available to individuals who are employed, self-employed, or working on a contract basis. However, it’s essential to carefully review the policy terms and conditions for any exclusions that may apply.
It is often offered as a form of decreasing term life insurance, where the coverage amount decreases over time as your mortgage balance decreases. Mortgage protection primarily aims to ensure that your loved ones can continue living in the family home without the burden of mortgage payments if you can no longer meet those obligations.
What is the cover provided by a mortgage payment protection policy?
A mortgage payment protection policy provides cover for various situations, and the level of cover can vary based on your specific needs.
- Accident and Sickness Cover: This type of coverage is designed to protect your mortgage repayments if you become sick or have an accident preventing you from working. It ensures your mortgage payments are covered during your illness or recovery period. However, it does not provide coverage for job loss or redundancy.
- Unemployment Cover: Unemployment coverage specifically protects your mortgage repayments if you lose your job due to redundancy. It offers financial support during the period of unemployment, ensuring that your mortgage payments are taken care of. It is important to note that this type of coverage does not extend to accidents or sickness.
- Accident, Sickness, and Unemployment Cover: For comprehensive protection, you can opt for a policy that covers all three scenarios: accident, sickness, and unemployment. This type of policy provides coverage for your mortgage repayments if you lose your job or cannot work due to accidents or sickness. It offers the highest level of protection by encompassing all potential situations that may impact your ability to meet your mortgage obligations.
When considering a mortgage payment protection policy, it’s essential to carefully assess your specific needs and choose the appropriate level of coverage based on your circumstances. Whether you prioritise coverage for accidents, sickness, unemployment, or a combination of these factors, reviewing the policy terms and conditions is crucial to ensure you understand the extent of the coverage provided.
Key differences in life cover and mortgage protection
While both life cover and mortgage protection offer valuable financial security, several key differences set them apart:
Cover focus on life cover and mortgage protection
- Life Cover: Life cover provides comprehensive coverage that extends beyond mortgage repayment. It offers flexibility in utilising the payout for various purposes, such as income replacement and meeting ongoing living expenses.
- Mortgage Protection: Mortgage protection specifically focuses on ensuring the repayment of the mortgage in the event of the policyholder’s death or disability. The coverage amount is designed to align with the outstanding mortgage balance.
Cover duration on life cover and mortgage protection
- Life Cover: Life cover policies typically provide coverage for a specified term, such as 10, 20, or 30 years. The coverage duration can be tailored to align with specific financial goals or dependents’ needs.
- Mortgage Protection: Mortgage protection policies are often structured to match the term of the mortgage. As the mortgage balance decreases over time, the coverage amount also reduces accordingly.
The above should give you a better understanding between life cover and mortgage protection, but there is still more to grasp. 
Flexibility in a payout on life cover and mortgage protection
- Life Cover: Life cover provides a lump sum payout to beneficiaries upon the policyholder’s death. The funds can be used as needed, providing financial flexibility to address immediate expenses, ongoing living costs, and future financial goals.
- Mortgage Protection: Mortgage protection policies typically offer a decreasing payout corresponding to the outstanding mortgage balance. The payout is intended to cover the mortgage debt, ensuring the family home remains secure.
The premium cost of life cover and mortgage protection
- Life Cover: The premiums for life cover are generally higher than mortgage protection due to the broader coverage and longer duration.
- Mortgage Protection: Mortgage protection premiums are usually lower since the coverage is focused on repaying the mortgage and decreases over time.
Understanding the difference between life cover and mortgage protection is crucial when considering the right insurance option. Life cover offers broader coverage, flexibility in utilising the payout, and can protect your family’s overall financial well-being. On the other hand, mortgage protection ensures explicitly that your mortgage will be repaid if you pass away or become disabled.
The choice between the two depends on your specific circumstances, financial goals, and priorities. It’s advisable to consult with an insurance professional who can assess your needs and guide you in selecting the most suitable option to protect your family and assets. Ultimately, life cover and mortgage protection are vital in securing your family’s future, offering peace of mind during uncertain times.
