Mortgage Payment Insurance Explained

Homeowners would never think twice about taking out home insurance but when it comes to mortgage payment insurance it is a totally different thing. However mortgage payment protection is just as valuable as home insurance, after all if you lose your home to repossession, what is the point of having home insurance? You could lose your home to the lender if you get into mortgage arrears that you cannot afford to repay. Just a single missed payment affects your credit rating and would have the lender sending out a reminder letter.

You would then have to catch up on the missed payment while at the same time keep up with the agreed mortgage payment each month. Without an income keeping up with the repayment could be extremely hard if not impossible and more missed payments would have the mortgage lender taking you to court and the judge could give you an eviction order. This would mean you have so long in which to leave your home and the lender would sell it to get back what you owe. During the time the home was up for sale you would also be expected to keep up with the payments even though you were no longer living there. While this is the worst case scenario for thousands of people each year mortgage repossession does happen. It could perhaps have been avoided if the homeowner had chosen to take out mortgage payment insurance.

Mortgage Payment Insurance from Burgesses

Mortgage payment insurance is often offered when taking out the mortgage. However this can add a huge sum of money onto the borrowing and if lenders add in the cover before adding on interest then you will be paying interest of the protection as well as the mortgage. Many high street lenders also fail to make the consumer aware that there are exclusions in a mortgage payment insurance policy and that these have to be checked against the consumer’s circumstances if they are to be sure they would be able to put in a claim. A far better solution is to go with an independent payment protection specialist and take out cover this way.

In 2005 the Office of Fair Trading announced (after receiving a super complaint from the Citizens Advice) that mis-selling had occurred within the payment protection sector. They revealed that policies had been sold to those who could not hope to claim on them due to the exclusions. Protection had been sold to those who were only in part time work, who were self-employed or who retired. As a result fines were given out to many well known names on the high street which did include a mortgage lender who not only had to hand over a company fine but also a personal one. The sector has seen changes for the better after the Financial Services Authority laid out guidelines for selling protection. However many individuals are still put off from taking out what is a very valuable form of cover. As long as you check the exclusions in mortgage payment insurance against your circumstances then a policy will work in the way it is designed to work.

Mortgage Payment Insurance

Mortgage payment insurance is certainly a far better back up plan on which to fall than relying on benefit from the State. Even if you are eligible to claim State benefit the help given would only cover the interest part of the mortgage and not the capitol. This means that you would still suffer mortgage problems. You would also only be provided with benefit up to a certain amount and must not have savings in the bank over a certain amount. This would mean you would be expected to use redundancy money before the State would step in and help. You should not have a partner in full time work living with and should be eligible to claim income support. You would also be waiting for many months before you would see any benefit from the State. Relying on savings can also be a let down as you might have to rely on them for many months. You would not know how long it might take to find work again and of course you would not know when you would be fit and well enough to return to work again. Your savings could deplete and then you would find yourself with a struggle on your hands to find the mortgage repayment.

By doing so you will be quoted a premium each month for mortgage payment insurance which would be based on the amount of cover you need, your age and the level of protection you want. By being able to tailor your policy for what you need is a great way to make savings. For instance you might not need to protect against accident, sickness and unemployment together. You might just want to take out a policy to safeguard against unemployment caused by redundancy. You could also just want to take out cover to safeguard against accident and sickness. With an independent provider this is possible. The level of protection you insured against is the sum of your mortgage payment or up to the amount set by the provider. This is the amount that you get back as a tax-free sum if you needed to put in a claim after becoming redundant or falling sick/suffering an accident.

Mortgage payment insurance would payout after a certain length of time and would then continue to payout for so long. You would have to check this in the terms and conditions of the policy before taking out the cover. You would usually be asked to defer from making a claim on the cover until between the 30th and the 90th days of being unemployed or incapacitated. Some providers would offer to back date the payment to the very first day you became unemployed or were unable to work. You would then receive either 12 monthly payments or 24 monthly payments and this would allow you time to recover or to find work again. After this period of time the policy would stop providing for you as it is assumed you would have found work or returned to work.