Protection

Mortgage protection insurance helps homeowners to continue making mortgage payments when they experience unexpected events, such as redundancy, illness, or injury. Your policy can cover unemployment, or accident and sickness, or both. Cover typically lasts for 1 to 2 years and ensures your home remains secure at a time when you experience financial setbacks.

You don’t need life insurance and mortgage protection insurance to obtain a mortgage, but it is likely a lender will want confirmation you have one of these policies in place, especially as a first-time buyer. Life insurance provides financial security for your family after your death, which can cover your mortgage and other expenses. Mortgage protection insurance covers your mortgage balance, with the level of protection decreasing over time, in line with your mortgage decreasing as monthly payments are made.

Income protection insurance which is paid from your personal account (not being paid by a business) is free from all forms of taxation under current tax rules. On some policies, where a lump sum is paid if you die before the end of the policy terms, this lump sum will form part of your estate for taxation purposes. This may be subject to inheritance tax, depending on your personal circumstances.

Income protection does not cover redundancy, or death. It only provides cover if you are unable to work due to injury or illness. Cover for redundancy can be provided by a separate policy, such as Accident, Sickness and Unemployment (ASU) insurance. Life insurance policies provide cover if you die, or if you are diagnosed with a terminal illness.

Payouts from income protection policies are likely to be tax-free. As it is a personal policy – and not paid by a business – the premiums are paid from your net pay, which is already taxed. Therefore no tax is payable on any claim payout you may receive.