Mortgage Cover Explained

Mortgage cover could give you peace of mind when buying your home. Perhaps you have taken your first step upon the property ladder or maybe it is a step further up. Either way, it probably involved the use of a mortgage to achieve this. Now you have the keys to your own home and that wonderful feeling of actually owning the place where you live. You are probably also experiencing that sinking feeling of doubt. What if you cannot make the payments, should you find yourself a second income. What if you are made redundant and finding another job does not come quickly? Worst still, you have an accident or fall ill and your recovery takes more than a few weeks. What then? How will you ensure that you do not lose your dream home? A possible solution to this potential dilemma is to take out mortgage cover – or mortgage payment protection insurance to give it its full title.

Mortgage cover is an insurance a mortgage payer can take out to protect against such an eventuality. Paying your mortgage will not be something that will cause you financial stress if you have the cover as it provides a tax free amount for every month that you are unable to work due to illness, injury or redundancy (up to set limits and after a qualifying period).

Mortgage Cover from Burgesses

You might think that the State would help you in cases of redundancy or incapacity, so why should you bother with insurance. Quite simply, the State benefits offered may pay a weekly amount and offer help towards paying your council tax but these amounts are normally minimal and dependant on your circumstances. You would probably be hard pressed to cope and it could result in mortgage arrears, receiving visits from the bailiffs or possible repossession.

State benefits are only available to those homeowners who meet strict criteria, such as your partner also not being in full time employment. At the time of writing (September 2008), 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.

However, from April 2009, the upper limit for the benefit would move to £175,000 and the benefit will pay out after 13 weeks. While this is good news for some homeowners, the changes will do little to help the vast majority of borrowers. Therefore, mortgage cover should not be dismissed as it is still a necessity.

Taking out this type of insurance could avoid such an undesirable outcome and give you much needed peace of mind, especially in an uncertain economic climate. It is so important to keep a good credit rating for future loan requirements.

Mortgage Cover

You may have already experienced the mortgage providers offering mortgage cover as part of the financial deal when obtaining a mortgage. However, you do not have to buy it from them even if they attempt to sell it as the best thing since sliced bread. Mortgage payment protection insurance might be the best thing since sliced bread but it does not have to be expensive. A number of high street lenders have been known to sell expensive cover to increase the profitability of their cheaper mortgages. Looking at alternative suppliers and comparing their product content and premiums could yield quite a saving. Even if you have taken out your mortgage lenders insurance package, you generally can change to an independent supplier to enjoy a better deal.

As is often recommended, it is important to look at the small print of any mortgage cover contract. What items are covered can differ between policies. You need to decide what factors are essential or desirable and offset these against the price of the premiums. For example, the claim period is normally for 12 months, although some lenders will offer a longer period of 24 months. Some have no waiting period and you can claim from day one. Others might expect you to wait until the 90th day of your involuntary unemployment or incapacity before making a claim. The exclusion period from the commencement of the policy until you are permitted to make a claim can also vary.

As with a great number of insurance policies and credit agreements, your age and the respective increased risk to your ability to make the repayments, has quite an influence on both the availability and affordability of a plan. There is generally a higher risk of ill health associated with older people. In addition, if you live in a society that has ageist tendencies, gaining reemployment should you find yourself involuntarily redundant, might prove difficult. Therefore, be prepared for your age influencing the price of the premiums.

Your nature of employment might also determine your eligibility. A self-employed person may have been granted a mortgage but it does not necessarily follow that they will be approved mortgage cover. Working less than 16 hours per week, taking early retirement or if you leave the UK, might also affect your ability to make a claim. Should you change your status during the life of the mortgage, then if you have mortgage cover, the provider needs to be informed. It may not necessarily affect its lifespan but all amendments to your lifestyle should be notified to avoid the possibility of problems should you need to claim in the future. Usually, the insurance is valid as long as you continue with the monthly premiums or until the loan expires.

The premiums may increase your monthly outgoings by a marginal amount but the relief of knowing that there is a financial safety net in place may greatly compensate for this additional expense. There is generally a good selection of cover options from which to choose and finding the best policy to suit your circumstance should not prove too difficult. The decisive factor when opting for mortgage cover might be a policy that offers good cover, has the lease number of exclusions and with inexpensive premiums. This can invariably be achieved through an independent payment protection insurance provider.