Mortgage Insurance Quote explained

In these troubled economic times of a floundering housing market, spiralling costs of living, a steadily increasing number of home repossessions and the spectre of more widespread unemployment, mortgage payment protection insurance is surely a prudent investment. But there are several reasons why it is important to take care when selecting such a mortgage insurance quote.

Mortgage payment protection insurance – or simply mortgage insurance as it is often known – ensures that mortgage repayments continue to be made even if the borrower finds him or herself unable to work because of an accident or sickness or if they have been made involuntarily unemployed. Cover is arranged in equal value to the monthly mortgage repayments (plus associated costs of any mortgage life insurance) and, in the event of accident, sickness or unemployment, the insurance pays out the agreed monthly benefits.

Clearly an indispensable form of protection, it is nevertheless important to take at least a second look at any mortgage insurance quote because of the way the product is often sold. There is no doubt that mortgage payment protection insurance is certainly sold very enthusiastically – it is big business. Such big business, in fact, that, taking into account payment protection insurance in all its various forms, the market is worth an estimated £5.5 billion in annual sales.

Mortgage Insurance Quote from Burgesses

The enormous value of the market itself would not be so much of a problem but for the fact that it has been claimed that banks and building societies have been over-pricing the product sold to their customers, raking in an estimated £4 billion every year in profits. Banks and building societies are in a privileged, frontline position when it comes to selling insurance designed to protect mortgages and loans. Often making it appear that such insurance is a condition of being granted the mortgage, customers can be more easily coerced into a heat of the moment decision to buy. Others have even ended up buying mortgage insurance without even knowing it, since the premiums have been quietly added to the cost of the monthly repayments.

Mis-selling on such a grand scale has naturally caught the intention of the government watchdogs, the Competition Commission and the Office of Fair Trading, with the former confirming in a report in June 2008 that many financial institutions had been guilty of unreasonably aggressive sales tactics.

This coincided with a separate investigation by the consumers’ champion, Which?, who estimated that some two million customers had been mis-sold one form of payment protection insurance or another. The Which? Report levelled its charges against the industry for mis-selling policies which would prove to be invalid if claims were made upon them simply because the holders were ineligible for the cover being sold.

Unsuspecting customers mis-sold the insurance in this way included those who would be ineligible because they were no longer of working age, had pre-existing medical conditions, or whose nature of employment excluded them from such cover. Clearly, these are all quite natural and reasonable exclusions from policies which insure against the risks of lost income through being off work through accident or sickness or following compulsory redundancy. Such obvious conditions, however, were conveniently “overlooked” by some banks and building societies in their unfair pursuit of the rich profits from selling such insurance.

Fortunately for the consumer, of course, every cloud has its silver lining. In the case of the past mis-selling of payment protection insurance this has taken on a number of forms.

The first, and probably most important consequence, of the whistle having been blown against some of the big-name banks and building societies is that it has helped to throw the spotlight onto those smaller, independent insurance providers who have been honestly selling a valuable commodity at affordable prices. These are the providers who can genuinely offer an independent, standalone mortgage insurance quote, since they have no loan or mortgage to supply and, therefore, no vested interest. Such independent providers of standalone mortgage insurance have already been acknowledged by the Financial Services Commission as consistently offering are far more affordable and better value for money product than the big-name lenders.

Mortgage Insurance Quote

The second result of the hue and cry about past instances of mis-selling, of course, is that the guilty parties will have realised the errors of their ways. There will always be the hope that the banks and building societies that have benefited from such avarice in the past will themselves buckle down and start trading in a much-needed financial service with honesty, fairness and integrity. Is that too much to hope for? It appears that it might be and a development that the Competition Commission seems unlikely to want to leave to chance. There has already been discussion about the regulator taking away from financial institutions that actually do the lending the ability also to sell the insurance that protects those loans and mortgages. If the banks and building societies are prevented from selling mortgage protection at the “point of sale”, at the same time that the mortgage is arranged, then consumers will have the opportunity to shop around for much better deals on standalone insurance from the independent providers.

In something of a churlish response to the Competition Commission’s recent findings, some banks and building societies have suggested that if they are to lose the £1.5 billion that has so far been taken off their customers through mis-sold payment protection plans, then the cost of loans and mortgages could rise even further!

It is clear, therefore, that many of the big-name lenders are unlikely to give up their market advantage so easily. They have enjoyed the lion’s share of a £5.5 billion a year market for too long to willingly relinquish it overnight.

More than ever before, therefore, the onus is on the consumer to examine every mortgage insurance quote with great care and to remember that the industry’s own regulators have encouraged any potential policy holder to buy instead from an independent insurance provider, whose fairness and integrity can be counted higher than those of many banks and building societies.