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Mortgage Protection Often Misunderstood But It Can Be Valuable

Mar 31, 2008
Mortgage protection along with the rest of the family of payment protection is often misunderstood. Problems began in 2005 and faith declined in the payment protection insurance industry. This is leaving many homeowners without a safety net on which to fall if they should lose their income. A policy can be taken out to insure against unemployment due to redundancy or for accident or sickness.

You are able to choose between covering all three or accident and sickness only or unemployment only. The cost of the policy will reflect this along with how much of your mortgage you wish to cover and your age.

One of the most confusing factors regarding mortgage protection is the choices the individual has when it comes to buying a policy. A policy is usually offered by the high street lender at the time of taking out the borrowing. However taking protection this way if often the dearest option. The high street lender rakes in around 4 billion each year in profits from selling cover alongside a cheap loan. A far cheaper way to get valuable protection is by choosing to shop around for the policy. By getting your quote with a standalone provider, you will also get access to the key facts, terms, and conditions that come with all policies. The terms and conditions will make the individual aware of any exclusions along with giving advice regarding the start and end times of the cover.

All mortgage payment protection policies have a period of waiting before the policyholder is able to put in a claim. You are usually asked to wait between 30 and 90 days before you would begin to receive the protection. Once a policy has commenced you would then benefit for between 12 months and 24 depending on the provider. Some providers would backdate the cover to the very first day of the policyholder being unemployed or declared unfit for work.

Mortgage protection should be given some very serious thought. While homeowners often rely on State benefits to help them or savings, neither is a practical way. Savings could help over the short term, however if you remained unemployed or ill they could soon be depleted. To benefit from State help then you must be receiving income support and meet other requirements. You would be ineligible to claim if you had savings over a certain amount. In addition, you would also be ineligible if you had a partner living with you in full time work. If you were eligible and had taken the mortgage out after October 1995 then you would have to wait 9 months before seeing any money. Even then, the help given would only be towards the interest part of the mortgage up to the first 100,000.

Mortgage protection can be a lifeline by providing you with the tax-free sum you chose to insure at the time of taking out the cover. While it does have a few exclusions, it would pay out the full sum of your monthly mortgage repayment. This would mean there would be no possibility of you getting behind on your mortgage and so your home would not be at risk of being repossessed. A policy can do what it is supposed to do and buying with an independent provider is the cheapest way of protecting.
About the Author
Simon Burgess is Managing Director of the award-winning British Insurance, a specialist provider of mortgage protection , income protection insurance and loan protection insurance.
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