Mortgage protection insurance not only helps you ensure that the mortgage payments are kept up to date, but can also avert the risk of repossession. It keeps your home safe, even when assorted misfortunes have temporarily snatched away your normal, regular income from work. Such threats to your home are perhaps more common – and therefore more likely – than you might imagine.
This is especially true in the current economic climate of recession. The Council of Mortgage Lenders, for example, has revealed that there was a 50% increase in the number of repossessions during the first quarter of 2009, compared to the same quarter last year, according to a report in the daily Telegraph newspaper on the 15th of May 2009. Although the actual number of repossessions during the first quarter of this year snatched away 12,800 homes, the Council of Mortgage Lenders has nevertheless also forecast that the annual total could reach 75,000.
No homeowner, of course, wants to be counted among that 75,000. Mortgage protection insurance remains one of the best ways of avoiding it. The way in which the insurance works couldn’t be a simpler way of protecting your home by ensuring that the mortgage repayments continue to be met. If you suffer an accident or illness and need to take unpaid time off work, or if your income dries up altogether following redundancy, the insurance pays out a regular, monthly benefit that can be guaranteed to pay the whole, or a proportion, of the monthly mortgage repayments. Policies generally incorporate an initial waiting, or “qualifying”, period of some 30 to 90 days, depending on the insurer chosen, after which the insured benefits are paid on the same date each month until normal working can be resumed and regular income restored, or for up to a typical maximum of 12 months, whichever is the shorter period.
Most homeowners, of course, will find that this full year of potential benefits is more than enough time in which to recover from an incapacity or to find another job. For prospective policy holders who feel that the interval might be inadequate, however, some insurers offer the option – on payment of an additional premium – of extending the maximum payout period to up to 24 months. This illustrates the point that premiums are, of course, directly related to the maximum period of benefit payments in the event of a claim – the shorter the period, the lower the potential liability for the insurer and, so, the cheaper the premiums that need to be paid.
The other deciding factor in the cost of the premiums, of course is the level of cover required – in other words the amount of mortgage repayments that need to be insured. Mortgage protection insurance is very flexible in this regard, too. It allows the protection of most sized mortgages, both large and small, up to a typical maximum of £1,500 a month, or the equivalent of 50% of the policy holder’s normally earned gross income from regular employment, whichever is the lesser amount.
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