When times get tight and money is not as easy to come by as it once was, people can take small steps to improve their finances. People may cut down on car journeys, go somewhere cheaper on holiday, or put that house improvement to one side. But sometimes a home owner can face a blow which puts them in serious trouble. If they suddenly lose their income, any mortgage they have may be put in jeopardy and therefore have knock-on implications for their ownership of the house. But for a few pounds per £100 worth of cover, someone could get themselves a mortgage insurance policy which provides a safety net and peace of mind.
This kind of cover is tailored to back up someone’s ability to pay the regular repayments on a home loan if they end up without an income. To qualify they will normally need to have lost their earnings due to involuntary redundancy, illness, or injury following an accident they may have had.
It is a product which is widely available from mortgage lenders themselves, some big-name high street insurance companies, and independent suppliers. It has a premium as with other kinds of insurance and simply involves submitting a claim if you feel you need to use it. To qualify for payouts you will need to have lost your job not through being sacked or accepting an offer of redundancy, but for the reasons listed above. Some insurance companies also supply what is known as carer cover, paying out if someone is to leave their job to look after someone close to them full-time.
After you claim successfully on mortgage insurance you can expect to get a regular tax free cash lump sum towards your home loan costs, and this means help with not just the repayment, but the interest and other associated outlay, like council tax. These payments simply arrive in your account for a set period laying out your policy, and are designed to help you keep going with the home loan until you are back in work and earning your own cash again.
Payments often continue for a year to two years, depending on what kind of policy you purchase. It is designed not to replace your career income but to provide you with a helping hand until you are either fit and well again and working, or until you find a new job after being let go.
Mortgage insurance may not cover what are known as pre-existing medical conditions, meaning it will not pay out if you have to leave your job due to something which is related to an illness diagnosed before you bought the cover. This is normally made clear by an insurance company as you take out a policy, and it may be worth checking with them on what will and will not be covered.
How much you get in your regular payments is decided by you at the start of your policy and you can often choose to protect a percentage equivalent of what you normally spend on your mortgage and its related outgoings. So a policy might start at 50 per cent of what you spend, and go upwards, although a cap will normally apply to the policy.
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