In today's uncertain economic climate, protecting your income and assets is a must. As a result, income protection and mortgage protection are valuable tools for financial security.

Choosing between the two can be tricky. While both policies help offer financial support, they have their own unique benefits.

What is income protection insurance?

Income protection insurance is a form of cover that provides financial support if you become ill or injured. It pays out parts of your salary acting as a regular income. This carries on until you recover and return to work, or until the policy expires.

A key benefit of this insurance is that it can help pay towards any essential outgoings. This can include mortgage payments, rent and other bills, so you have less to worry about during those difficult times.

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Do I need income protection insurance?

There are a number of reasons you may need income protection insurance, such as:

  • Protection against loss of income: provides a financial safety net if you’re unable to work due to illness, injury, or disability. Please note that your policy may exclude pre-existing conditions. 
  • Covering living expenses: Helps cover expenses like mortgage/rent payments and other bills when you are unable to earn an income.
  • Peace of mind: gives you peace of mind, knowing that you have financial protection in place if you are unable to work.
  • Support for self-employed individuals: provides a vital safety net for self-employed individuals in case they are unable to work.
  • Rehabilitation support: Many policies offer rehabilitation support services to help you recover and get back to work as soon as possible.
  • Supplementing sick leave or disability benefits: Can bridge the gap if your employer's sick leave or government benefits are unable to cover expenses. Please note - Some state benefits may be impacted by an income protection plan.
  • Protecting your family and/or loved ones: can provide support, reducing any financial burden if you’re unable to provide for them.
  • Limited or full: You have the choice of Limited or Full Term Income Protection. Limited Term is cheaper, but usually only pays out for a short time – 2 years for example. Full term could pay out until you recover and go back to work, until your retirement age or until the policy expires, whichever happens first. 
  • Multiple claims: It is usually possible to claim multiple times over the policy, though this may differ in your terms & conditions, so be sure to chat to your adviser or insurer to be sure.

What is mortgage protection?

Whilst income protection aims to help with your mortgage payments or bills if you are too unwell to work, mortgage life insurance aims to clear the mortgage balance if you were to pass away. 

This is usually done by taking out a decreasing term policy that matches your borrowing and mortgage term. 

Do I need mortgage protection?

Mortgage protection offers a range of benefits like: 

  • Protection for your home: Mortgage protection insurance helps to ensure that your home and your investment is safeguarded in the event of your death. 
  • Paying off your mortgage: This type of insurance is designed to help pay off the mortgage balance if you pass away. That means your loved ones won’t have to worry about making repayments. 
  • Ensuring financial stability: Provides financial security to your family/loved ones, allowing them to stay in their home even if you’re no longer there to contribute to the mortgage payments. 
  • Peace of mind: Knowing that your mortgage is protected so that your loved ones aren’t left with a large financial burden can give you valuable peace of mind.

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Is income protection the same as mortgage protection?

Whilst the two terms seem fairly similar - since both plans aim to pay your mortgage in some way - there are vital differences.

Income protection aims to pay out if you become sick or injured and are unable to work. This should help with your monthly mortgage repayments, and other day-to-day costs that come with being off sick from work.

Mortgage protection on the other hand would pay out if you were to pass away or be diagnosed as terminally ill. The plan aims to help your loved ones clear the remainder of the mortgage balance, leaving them with less financial burden.

Should I choose income protection or mortgage protection?

It really depends on your individual circumstances and financial goals. Income protection can help maintain your financial security if you become sick or injured long-term, receiving payments until retirement age if necessary. However, this type of policy may not be suitable for everyone.

Mortgage insurance also provides a financial safety net for your loved ones in case you pass away before the mortgage is paid off. The plan helps to ensure that your family or loved ones can clear the balance if you pass away. 

Since the two products have different intentions - one provides protection if you’re unwell or disabled and the other if you were to pass away - it’s not unusual to have both plans in place to provide protection for any uncertainties. 

Alternative forms of cover

Perhaps you don't need mortgage protection or income protection insurance. There are other forms of cover that can provide for your family and/or loved ones in the event of death or illness.

Life insurance is a form of protection designed to provide a financial payout in the event of your death. It can help to alleviate the burden of living expenses, funeral costs and other debts that your loved ones may face.

There are two main types of life cover - whole and term life insurance.

Whole life insurance provides lifelong protection and is usually more expensive. While term life insurance provides coverage for a specified period of time - usually up to 50 years (depending on the insurer’s T&C’s and your age at application). Both provide fixed premiums unless you opt for an increasing policy.

Critical illness cover pays out a lump sum if you are diagnosed with a serious medical condition or injury. It can be used to help with living expenses or medical costs and provide financial security during an uncertain time.

This policy is designed to help you take care of yourself, family, and/or loved ones if the unexpected were to happen. It can also be used to help cover mortgage payments if you are unable to work.

Please note: The insurance products offered by Cavendish Online have no cash-in value at any time. If you stop paying your premiums your cover will stop, your policy will end, and you will receive no benefit. If you have not claimed before the end of your policy, the policy will end, and no benefit will be paid.

If you are facing financial difficulty, please contact your insurer before cancelling your policy or letting it lapse. They may have options available that means you don't have to lose the plan.

Get expert advice from Cavendish Online

At Cavendish Online, we understand that making decisions about your finances can be daunting. That’s why we provide expert advice and guidance to help you find the right protection for your needs.

Our experienced advisers can answer any of your questions, providing tailored solutions to suit your circumstances. Get in touch today to find out more about how we can help protect you and your loved ones.

Speak to the experts...

Give our advisers a call today.

Our team of friendly and professional advisers are on hand to help with any questions you may have regarding Life Insurance, Critical Illness Insurance and Income Protection.

The advisers can also make recommendations tailored to your current situation and will research the market on your behalf, ensuring you secure the cover you need and supporting you every step of the way. 

01392 43 61 93(Monday to Friday, 9am - 5.30pm)

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