When you take out a mortgage or bond, you will be required to take out life insurance. This is so that if something happens to you, the insurance will cover your mortgage repayments. This usually includes death, disability and possibly retrenchment cover.

What you need to know is that you do not have to take the mortgage protection plan offered by the bank. You can shop around for other life insurance quotes which you can then cede to the bank. Just make sure you are comparing like with like, and that the polices you are comparing have the same cover as well as terms and conditions.

For example, if you take out mortgage protection cover, the amount of cover should decrease in line with the reducing capital balance of the mortgage. This will reduce your premiums compared to a life policy where a set amount may be insured for life.

Another option is to cede your existing life insurance policy to the bank. Before you do this, you need to consider several factors:

• Is the life insurance sufficient? If the value of the life policy only covers the outstanding mortgage, then there may be no money left to support your financial dependants. In this case you may want to increase the amount of life cover.
• It is important that your dependants or beneficiaries on the life policy know that the first claim will be paid to the bank and they will only receive what is left.
• Find out if there are any terms and conditions to ceding your life policy and what those may be.
• Remember to update the policy when your mortgage is paid up.

Also remember that if you have a joint home loan, the bank will most likely ask both parties to take out life cover to insure their portion of the loan.

Make you mortgage insurance work for you.