Nothing in life in certain and while one day you can fit and healthy and employed in a job that keeps you financially comfortable, the next day you could become unable to work due to incapacity or you could suddenly face involuntary redundancy. And if this happens, the first thing you will think about is – how will I manage financially? The good news is that if you have a mortgage protection insurance policy in place, then at least you will not have to worry about losing your home.
What does mortgage protection do?
If you lose your income due to involuntary unemployment or due to becoming unable to work because of accident or sickness, or you have to leave work to become a full time carer, then a mortgage payment protection insurance (MPPI) policy can help.
It almost sounds too good to be true, but a mortgage protection insurance policy will help you continue to maintain your mortgage repayments by providing you with a tax free monthly sum. The maximum monthly sum you will typically be able to receive will be around 50% of your gross monthly income or up to a set limit (normally £1,500), whichever is the lesser.
Included in this maximum amount for your mortgage insurance can also be the provision for things like home and life insurance, and utilities.
This means that at an already stressful period of your life, you do not have to worry about keeping your home running smoothly, nor face repossession due to mortgage arrears.
When can I claim on my policy?
Policy terms and benefits do vary among the different mortgage protection insurance providers but typically you can make a claim on your cover from anywhere from 30 days to 90 days after the covered events happens.
Obviously, a 30 day waiting period may be more attractive option when choosing your mortgage protection insurance policy as opposed to a 90 day period, unless you think that you will manage financially for three months, with no income.
There are also some providers who offer back to day one cover, where they will back pay your claim to the first day of incapacity or unemployment. This means suffering due to any loss of income will be minimised.
How long will my mortgage protection policy run for?
The length of time that you will continue to receive benefits will be subject to the individual provider’s terms and conditions but policies typically run for 12 to 24 months, or until you get back to work, whatever is the sooner.
That leaves you free to concentrate on your recovery; find a new job; or care for a loved one, without too much financial worry.
Is there anything else I should know?
There are certain reasons why an individual might not be eligible for mortgage cover but a reputable payment protection insurance provider will give you the information needed to determine this.
As with all things financial, you do have to read the terms and conditions of the mortgage insurance policy you are considering, as they do vary from provider to provider, so always check the small print.
Look out for exclusions, too. These are things that could render your policy useless in the event of a claim. Most mortgage protection providers do not offer cover to those people who are of retirement age, nor those in part time employment.
And if you have an existing medical condition, it is unlikely that you would be able to claim on your mortgage insurance policy if it caused you to have time off sick from work.
Typically, unemployment benefits will not be paid in the case of misconduct which contributes or leads to your dismissal; if you resign; or you are made voluntary unemployed or voluntary redundancy.
However, provided you are aware of any factors or extenuating circumstances that could stop you making a claim on your mortgage protection policy, then you will have a fail safe way of ensuring that your mortgage commitments will still be met even if disasters strikes.
What about the cost?
Maybe you think that taking out mortgage protection insurance is simply another expense you can ill afford. However, the fact that you will receive a monthly tax free sum with which to pay your mortgage should you lose your income must be reason enough to consider the cover.
Certainly, mortgage insurance does not need to be expensive. When bought independently, from a standalone provider for example, it can be an extremely cost-effective way to ensure that you will keep your home in the event of accident, sickness or unemployment.
The cost of your mortgage protection insurance will be determining by how much protection you need and will typically be calculated for every £100 worth of cover required. With an independent provider, this can be from just a few pounds a month.
Those homeowners who believe that the Government would step in and provide for them in their time of need may often be disappointed. While the State does provide financial assistance, there are very strict eligibility criteria to meet. And even if you are eligible to claim, the amount you would get would in most cases fail to cover your mortgage repayments.
It can make sense to protect your biggest asset and, if you have a family, to make sure that they keep a roof over their head. So once you have made up your mind that mortgage protection insurance is right for you, then you have to find the cheapest possible quotes. Purchasing a mortgage insurance policy from your lender that is offered alongside the borrowing is usually the most expensive option. Lots of independent research has highlighted that the cheapest quotes will usually be found with standalone providers, so it is imperative that you shop around for your mortgage protection insurance cover and compare the costs and policy benefits before you buy.
Mortgage protection can provide a financial lifeline at a time when you could be drowning in debt and financial commitments. In a world where nothing can be classed as certain, this is essential.
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