Mortgage protection required

[ihaveaquestion2]

Hello, I was hoping someone could help me with a couple of questions.

I'm aware that when it comes to mortgage protection prices there are 2 types:
1) remains the same price every month for the length of the mortgage
2) reduces in price as the principle goes down

I currently have the first. I asked my mortgage protection provider about this and they said that in the event of death
1) will pay beneficiaries the market value of the property
2) will pay the bank whatever is left on the mortgage

Is that correct?

Secondly, having thought about this I remembered that through work I currently have a Life Assurance policy.
Is it true that in the event of death 1 of these policies will be invalid, ie money would be paid only once? And if so would it be better for me to try to switch to 2) above?

Thanks for the help in advance.

 

[Monbretia]

There is nothing right there really!

Most Mortgage Protection policies have the same premium for the life of the mortgage but the amount to be paid out goes down over the years similar to the balance of the mortgage.

You can get ones that will give you a set payout equal to the original mortgage and that is Level term but most MPP are decreasing, the amount payable and not the premium though! Level term is a more expensive policy than decreasing obviously.

Secondly nobody is paying out the market value of the house to anyone, a MPP is usually assigned to the lender as it's purpose is to clear off the mortgage if you die so it goes to the lender and if it's a decreasing one it usually pays off what is outstanding. If you happened to have one of the Level ones that would pay out the initial amount insured to the bank who would clear off the mortgage from it and give any leftovers back to your estate.

Lastly life insurance is not like house insurance in that only one policy pays out if the event happens, you can have as many insurances on your life as you can get approved for and all will pay in the event of a valid claim.