This is an insurance policy that will cover your mortgage repayments if you as an employee are unable to work and remain so for 30 days or more due to an accident, sickness or from being made redundant. Should you be self-employed, and are admitted into hospital for 5 consecutive days or more, your mortgage repayment will also be covered.

This is also known as life cover for your mortgage. It is a form of term assurance that is designed to pay off the outstanding amount of your mortgage should you or your partner die during the term of the loan and will be required by your bank as a condition of the mortgage loan. The amount of cover reduces each year, in line with your mortgage as you pay it off, assuming interest rates do not go over a defined level, typically 6 - 9% per annum and your repayments are kept up to date. The monthly or annual premium is fixed through the term of the policy. Mortgage protection is cheaper than standard term assurance because of the level of life cover reduces over the term of the policy.

Income Protection pays you an income if you are unable to work due to any illness, injury, accident or disability.  You simply pay a premium every month, based on factors such as your occupation, health etc., that will ensure you receive a regular income if you are unfortunate enough to be out of work. This income will be paid right up to when you return to work or reach retirement age, whichever comes first.  This protection product is much more comprehensive than serious illness cover, so therefore acceptance under this plan can be difficult  in some circumstances and not all occupations are covered. Notwithstanding this, it must be a priority particularly for self employed professionals.

This cover pays you a lump sum if you are diagnosed as suffering from one of a number of specified severe illnesses. This lump sum could be used to pay off or pay down your mortgage or might be invested to provide you with an income for the future. The more common illnesses are:

• Cancer
• Heart attack
• Stroke

Term Assurance can be converted into subsequent life cover after the original policy comes to an end. You cannot be refused the right to take out the new policy regardless of the state of your health.

Life assurance which pays out a lump sum if you die within the term, but where the insurance sum assured reduces during the term. The earlier you die in the term, the bigger the payout your dependants get. This is normal for mortgage protection policies.

When taking out a new mortgage, people typically affect enough Term Assurance to ensure their mortgage is repaid on death. This is the minimum the lender will require. However, you should also consider how your family or dependents would fare out in the event of your death. A life assurance policy can pay a lump sum policy to your estate which could be used to provide a lump sum/ replacement income for your family into the future.