As a home owner you may decide that it is best for you to switch mortgages at some point int he future to get a better rate and save some money. However, if you got your mortgage protection insurance policy through your current lender and you choose to leave for another or just topping up your current mortgage then what happens to your protection plan? We will discuss a few different scenarios you may be facing and share what will happen to your mortgage protection insurance.
Topping up your Mortgage
The most important thing to ensure if you decide to top up your mortgage is that your protection policy is updated to cover the new value of the mortgage. You can do this by taking out a new mortgage protection policy that covers the new total of the topped up amount of the new mortgage, or you could just simply top up the amount of your current policy.
You should research both options, as it may be cheaper for you to keep your current mortgage protection policy, and then pay for a second plan that covers the rest of the topped amount.
Switching your Mortgage
When switching your mortgage your options are different depending on whether or not you have your own protection policy or if you got mortgage protection policy through your lender.
If you have your own protection policy then you can very simply just assign your current policy to your new lender. If the amount and term of your new mortgage stays the same then so will your total coverage as well as the premium you pay.
If you got your mortgage protection insurance through your lender in the form of a group scheme then your mortgage lender will cancel your policy and you will need to get a new plan either through your lender or on your own.
Mortgage Paid Off Early
There are a couple of options available to you if you believe that you will be in a position to pay off your mortgage early. The first option is for your to cancel your mortgage protection insurance and no longer be required to make payments. The second option is to keep your current mortgage protection policy and continue to make payments until the original end date. The second option may be a good choice if you have an insurance policy that covers more than just your mortgage payments. Examples of plans that might cover more than just your mortgage payments are a general life insurance plan and level term coverage.