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Mortgage Protection Insurance Explained in Derby

Mortgage protection insurance is a type of insurance that provides protection to homeowners from financial difficulties that may arise from unforeseen events, that could affect their ability to keep up with their mortgage payments.

This type of insurance is designed to cover a range of circumstances that may affect the borrower’s ability to meet their financial obligations, such as death, critical illness or disability.

There are different types of mortgage protection insurance, but they all aim to provide peace of mind to homeowners.

The most common types of mortgage protection insurance include life insurance, critical illness cover, income protection insurance and family income benefit. These policies provide different types of cover to ensure that homeowners can meet their financial obligations, regardless of their circumstances.

Life Insurance

When a homeowner takes out a life insurance policy, the sum assured should be enough to pay off the outstanding mortgage balance, if the policyholder dies within the term.

This is to ensure that the borrower’s dependants are not left with a debt they may not be able to manage.

Our protections advisors in Derby can help to identify the most suitable policy for you based on your needs and circumstances. We can help you understand the different options and recommend a policy that meets your requirements.

Critical Illness Cover

Critical illness cover is a type of insurance that pays out a lump sum if the policyholder is diagnosed with a critical illness specified in the policy.

The benefit is paid regardless of the long-term prognosis of the illness. This type of insurance is usually taken for a specific term and can have different options such as level or increasing cover.

For borrowers, critical illness cover is typically taken on a decreasing-term basis to align with the reduction of their mortgage balance.

While the type of illnesses covered varies from company to company, it is important to note that this type of insurance cannot be solely price-driven, and advice is recommended.

Many companies offer life insurance in Derby and critical illness cover in Derby as a combined policy that pays out on the first event. This means that the policy will pay out on the first occurrence of either death or serious illness. These policies can be written on a single or joint life basis.

Income Protection

Income protection is a type of insurance that pays out a monthly sum designed to replace your wages if you are unable to work due to illness or injury.

Unlike critical illness cover, income protection has no restrictions on the illnesses or injuries covered; the only factor is whether they make you unfit to work.

That being said, there are restrictions on how much you can cover and how quickly benefits would start to be paid. All income protection policies are written on a single life basis and are underwritten based on your health and lifestyle at the time of application.

Family Income Benefit

Family income benefit is probably the least common of the mortgage protection policies but can often be valuable, particularly for those with young families.

These plans can be taken to cover life and/or critical illness and are underwritten on application in the same way as mentioned above.

Unlike the traditional forms of policy, rather than pay out a lump sum, the cover would pay an annual or monthly income for the remainder of the term of the plan.

This can replace the income of the main breadwinner for a number of years, depending on the particular client’s circumstances.

Due to this, these policies are usually written on a level basis, an index-linked basis designed to keep up with inflation, or a combination of the two.


There is an old adage that says you can never have too much insurance. While it would be fantastic to cover yourself for every potential opportunity, affordability plays a massive part in the real world.

Therefore, a good advisor will sit down with you and tailor the type of cover to be the most suitable combination for your family’s priority and budget.

It is essential to understand that mortgage protection insurance is not an “either/or” choice, and many people have one or more of the different types of policies.

The key is to have the right cover in place that provides adequate protection for you and your loved ones in the event of unforeseen circumstances.

Working with a trusted protection advisor in Derby can help you make an informed decision and ensure that you have the right coverage for your needs.

Date Last Edited: December 6, 2023

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