With mortgage protection plans plans (also know as a decreasing term assurance), the life insurance amount paid out in the event of a claim reduces by a preset amount each year.
The amount payable is dependant on when the claim is paid out and will only repay your entire outstanding mortgage debt if the AMIR (Associated Mortgage Interest Rate) that was used to calculate the benfit reduces by each year has not been breached.
This means that if interest rates were to rise significantly between the time you took out your plan and any subsequent death claim, the amount paid by the insurance company might not be enough to completely repay your outstanding mortgage debt.
The mortgage protection quotes by our online quote system are provided to you using the provider's default rate that they guarantee to repay your entire mortgage debt before the end of the term. This is an important consideration when setting up this type of plan.
If two providers return the same premium level and Provider A guarantees to repay your outstanding mortgage on death as long as interest rates do not go above 12%, but Provider B only guarantees your mortgage debt as long as interest rates do not go above 8%, on a like-for-like cover basis, Provider A is likely to be a better choice of provider as there is a lesser risk of a shortfall arising in the event of death.