Everything you need to know before applying for mortgage protection

You are about to go on sale agreed on a house and might be wondering how to best prepare to apply for a mortgage protection application? This Q&A with the Zurich financial advisor Wayne O’Neill will help answer some of your questions.

Many people have gone on quite a journey to get to the point where they have gone sale agreed and while they are almost there, there are still some outstanding things that will need to be done, and one of those is getting mortgage protection.

There are many benefits to having mortgage protection from Zurich in place. It protects your home by helping to clear your mortgage if you die, providing you with peace of mind. It also provides protection for your family, safeguarding them from a substantial financial burden.

Q: What is a mortgage protection?

A: One of the requirements from the lender will be that the customer takes out a mortgage protection policy. Mortgage protection is essentially a policy that protects and covers the risk for the bank in the event that the customer dies during the term of the mortgage that they're drawing down.

The bank will insist on the mortgage protection policy being in place before they will allow the drawdown of funds. It can be taken out on a single, joint or zero life basis. So, for example where a husband and wife take out a joint life policy as part of their mortgage drawdown process, if one of them passes away during the term of the loan, there is peace of mind for the surviving spouse that the remaining mortgage balance will be cleared in full from the proceeds of the policy.

Q: Do you have to go with your lender for mortgage protection?

A: No, although your lender might offer you mortgage protection you don’t have to go with them for cover. As part of the excitement of buying a home, it's very easy to make a quick decision and proceed with the proposal that's put forward by the lender that you're dealing with. But it definitely pays to just take your time and shop around.

Consult with a few different providers and insurance companies, and make sure that you're getting the best deal with the mortgage protection policy that suits you.

Q: So, it pays to shop around for mortgage cover?

A: Yes. Some providers will charge a certain amount for the policy and others may be more competitive. So rather than making a rash decision and proceeding with the lender or the first quotation that's provided, we would always recommend taking your time, consult with a few different providers and ultimately make the best decision rather than making a quick decision as part of the mortgage drawdown process.

Q: How does the mortgage protection application assessment process work?

A: There's a few key steps as part of the process. Initially it's about getting a quotation. If a customer contacted Zurich, we would gather some information such as the customer's age, smoking status, the amount of cover required and the term of the loan. This information would allow us to provide an initial quotation which would be subject to underwriting.

Once the customer decides how they wish to proceed and the provider they wish to go with, the next step is to complete their proposal form, which covers the standard medical questions. Underwriting then take this information and proceed from there.

Q: How is the cost of a mortgage protection policy calculated?

A: Once the standard medical proposal form is completed, the underwriting team in Zurich will review the medical information provided, and then they'll decide whether or not there is additional information required.

Q: Can this process take long to complete?

A: That's purely dependent on the medical information provided on the application form. I would always suggest for people to start the process early, because if there are medical disclosures, it can take a bit of time for that information to be gathered.

We wouldn't recommend waiting until the last minute when you're close to drawing down the mortgage to start that process. You can work in advance and get ahead of the game. We would suggest that once you’re loan approved – as in approval in principle from your lender – you can start the mortgage protection application, which should allow enough time if there is additional medical information required. And if you're in a situation where the process is very quick, which hopefully it will be, you can then leave the policy on hold until such time as you draw down the loan.

Q: Is there any other documentation needed to process a mortgage protection application?

A: Yes. The specific details of your loan would be required at the initial stages to make sure that it's been quoted for correctly based on the terms of the mortgage that you're drawing down. It's also hugely important for full medical disclosure on the application form.

Q: If there are no medical disclosures, is the process more straightforward?

A: If there are no medical disclosures on the application form, then the process is likely to be completed fairly quickly. You could have a situation where your mortgage protection policy is ready to issue within a few days, and then it’s just a case of accessing it when the mortgage is ready to be drawn down.

Q: How is the cost of a mortgage protection policy calculated?

A: Standard rates would be based on the factors I mentioned earlier such as a customer's age, or their smoking status and the amount and the term of the cover required.

There are certain situations when medical history is taken into consideration, and that may result in an underwriting decision that could increase the premium, but that would be in a very small number of cases.

Q: Is it possible to obtain cover if you have a pre-existing condition?

A: It is possible. Again, it would be subject to an underwriting decision. Once the information is provided on the application form it would then be reviewed by the underwriting team and they would make a decision based on the information provided.

Q: If you have income protection does it increase your chances of getting mortgage protection?

A: No, it wouldn't - they're completely separate. Having income protection would have no impact on a separate mortgage application.

Q: If someone needs more information where can they go? 

A: Our mortgage protection quote calculator will give you an idea of the cost of cover. You can also get a free consultation with our financial planners. They will help you get started with your mortgage protection application. Alternatively, you can find an external financial advisor by using our find an advisor tool.

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