What is interest only mortgage cover insurance?
Interest only mortgage is a payment system which involves the payment of the interest on the amount borrowed from the money lender in the form of monthly instalments so that it would not put any burden on the person who has borrowed the loan.
This insurance policy assures you to pay the monthly mortgage payments to you even in the case of sickness, accident or loss of job.
This system involves a separate repayment strategy which you need to establish in order to pay off the interest accrued on the principal amount.
PROS and CONS of interest only mortgage cover
The pros of this system are such that you are allowed to choose a payment vehicle which is not only tax efficient but it is also efficient. Moreover, if the rate of growth becomes much larger than that rate that is estimated in the beginning then you may be able to pay off the mortgage much easily. You can receive the lump sum amount at the end of the repayment period.
The disadvantages of this insurance policy include that there would be no guarantee that you would be having sufficient funds in your account to pay for your mortgage debts. The investment could result in lower returns as compared to those which were earlier assumed. The debt would remain constant through the repayment period which means that you have to find alternative sources of income when it comes to repayment of the debt. Another disadvantage of this insurance policy is that in the case of non payment of premium, there would be a heavy penalty which would be applicable on your investment.
What this insurance covers?
The interest only mortgage protection insurance covers only three main types of insurance namely, critical illness insurance, permanent health insurance cover and normal life insurance. This would ultimately help you. This would enable you to pay lower premiums.
There are a number of brokers who keep on saying you that this policy is aimed at certain sections of the workforce of the UK. Keep in mind that if you want your insurance to pay for your monthly instalments of your mortgage then this policy is for you. All the proceeds that would be generated from this insurance policy would be tax free. This policy is for those who want their insurance to pay for their remaining mortgage capital.
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