There are many rumors that surround getting different types of insurance. One of the most prevalent ones is that you need life insurance or income protection cover to get a mortgage. Research shows that 30% of borrowers are told that life insurance is a legal requirement for applying for a mortgage while a further 50% of people who apply for a mortgage are told that they also need life insurance.
Life Insurance and Income Protection Are Both Sensible Options
Life insurance pays out a lump sum to your beneficiaries once you pass away. Income protection insurance, on the other hand, can cover your mortgage payments when you are unable to work due to an illness. In some cases, people have been told they need critical illness cover, which pays out a lump sum if they contract certain illnesses or develop certain conditions if they want to apply for mortgage protection insurance.
All three of these options are sensible options for families that want some peace of mind in knowing that their loved ones will be taken care of when they pass away in the case of life insurance and that mortgage payments will be taken care of by income protection insurance.
None of these insurance policies are a requirement when applying for a mortgage or mortgage insurance. The only type of insurance you need is buildings insurance. However, not all lenders ask for this insurance or make it a requirement for applying for a mortgage.
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Unscrupulous Insurance Brokers
Many brokers are paid on a commission basis which means the more coverage and plans they sell, the more they get paid. This can partially explain why they try to upsell you these types of coverages. The problem is that a lot of people do not know that these coverages are not required and when told they are, they tend to agree.
Do Your Research
The best way to protect yourself is to do proper research before applying for a mortgage or mortgage insurance. You can learn a lot online about how different lenders and brokers conduct themselves when selling a mortgage. Another option is to go on comparison websites. These websites let you compare quotes from the best insurance providers and since the quotes come directly from the insurance company there is no upselling.
Even with all the nefarious stuff going on, there are still companies that sell mortgage insurance without trying to upsell you. These companies scour the internet looking for the best mortgage insurance quotes and compile them for you. They are also an important resource in helping you get an estimate and an idea of how much you will pay once you apply for mortgage insurance.
Before applying for a mortgage or mortgage insurance, ensure you understand the requirements. There are lots of people who would like to take advantage of people who do not know what the process entails to upsell them services they may not need or that they already have.