Mortgage insurance can stop mortgage arrears building up if you should become a victim to unemployment or incapacity. You could take out cover that would provide an income in the event that you became a victim to redundancy and the policy would also payout for incapacity too. The income supplied from your policy would go towards you being able to continue meeting your mortgage demands and could stop you from falling into arrears.
You would have to choose the amount of your repayment you want to cover and this amount needs to be pre-agreed with the provider. This income is the money that you get back, tax free, should a claim have to be made on the policy due to you suffering either of the events insured against. You might be eligible to claim your income once the 30th day of your unemployment or incapacity had passed so you would have to check suitability with the provider. You could be able to continue claiming on the income for up to 12 months with some providers and with others you could claim on your policy for as long as the 24th month if you needed.
You can take out your mortgage payment protection insurance (MPPI) to safeguard your repayments against redundancy and incapacity together and claim for either event. You could otherwise choose just to take out mortgage protection against unemployment if this would suit your lifestyle more. The events you choose to protect go towards determining the cost of the policy so you are only paying out for protection that is needed.
When considering what events the policy would pay out for you should look to see if the provider would allow you to make a claim if you were to have to take the time off work to stay home and take care of a family member who suffered from incapacity. A generous provider would allow you this extra form of security but not all do so check the terms on offer when applying for the protection.
Also check the exclusions in a mortgage insurance policy as there will be at least the most common of these. The provider will give you the information needed so you can double check before you take out the policy. For instance you generally have to be in employment full time and have been working for a period of at least 6 months at the time of taking out the cover. You would also need to be living in the UK, Channel Isles or the Isle of Man before being eligible for a policy.
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