Why does my mortgage protection policy show a 6% interest rate?

All mortgage protection policies use an assumed interest rate of 6%. This means your cover decreases at the same rate as the capital of a loan with 6% interest. Life companies use interest rate bands of 6%, 9%, and 12%, with 6% being standard.

Since actual interest rates are typically lower than 6%, this ensures you always have slightly more cover than your remaining mortgage balance. This buffer guarantees the plan never pays out less than the full outstanding loan amount. Any surplus above the outstanding balance paid out in a claim will be returned to you once the mortgage is cleared.