Modern life is full of little safety nets, from the air bag on your car to the pin number required to use your credit card. Some of the little measures which we take for granted can help guard against disasters which would otherwise complicate and disrupt our lives. In this sense it is practical to take precautions where necessary, and some people look to protect their ability to keep up with debts. With a good credit rating now important if someone wants to borrow money in future, the option to protect the ability to pay that money is becoming more and more popular. Some people even protect their home loans with mortgage cover UK policies.
This type of policy is designed to protect against the unpleasant but possible scenario of someone losing their income through no fault of their own through illness, an injury suffered in an accident, or involuntary redundancy. No one can predict when ill health will strike, and some illnesses mean that people end up being off work for months or even years. In such circumstances basic sick pay schemes may not run the distance and leave someone high and dry in the longer term before they are fit and back at work. Job security comes into greater question in times of more economic uncertainty, and this leads people to wonder if their employer may one day no longer need their services.
To take out a mortgage cover UK policy, someone will need to be aged between 18 and 65, and will need to have held down a full-time job for a set period of about six months. They will also need to be an official UK resident. Provided they meet these basic requirements, most people will qualify and be able to insure part of the cash they have to shell out each month on meeting a homeloan and its associated costs.
Following a successful claim, payments normally kick in a month after the initial application, and some companies will backdate their payments to the day someone lost their income. Cash simply arrives on a monthly basis while someone is without their job and arrives in their account tax free. The money can be used to keep up with the regular repayments, the interest, council tax bills, utility payments, and even groceries. About 50 per cent of what someone would normally spend on these things is paid out each month on a basic policy, and greater amounts can be insured for a higher premium.
There are some helpful extras commonly available, such as carer cover for anyone who is concerned they might one day have to leave their job to look after someone in a full-time capacity. Most insurers are flexible and will provide cover which only guards against redundancy or only guards against health related problems.
Simon Burgess is managing director of protection specialists British Insurance. This is an independent insurance company which strives to offer better deals than high street insurers and lenders. He says: “A mortgage cover UK policy might sound like one more extra expense, but it takes on extra significance in times of financial uncertainty and can provide an absolutely vital safety net in certain circumstances.”
For many years I have been a staunch campaigner against the major names in finance who, I believe, rip-off their customers by selling over priced, often unsuitable payment protection insurance (PPI) cover.