Mortgage Protection Insurance

Mortgage Payment Protection Insurance Explained

2008-10-20T17:21:00.000-07:00

Mortgage payment protection insurance is taken out in order to safeguard the possibility that you could come out of work due to an accident, long term illness or through unforeseen unemployment. The cover will usually pay out for up to a period of 12 months (with some policies, it will be for up to 24 months) providing you have been out of work for a defined period of time, which is usually around 30 days though can be longer depending on the policy.

Your monthly mortgage repayment is without a doubt probably the biggest outgoing and as such if you were to come out of work how would you be able to afford to keep up the repayments? The State does very little to help financially, so unless you have a nest egg of your own, then taking out cover to protect your mortgage is essential.

A mortgage payment protection policy can be bought alongside the mortgage and unfortunately this is the most common way and usually the dearest option when it comes to taking out the insurance. The only way to get a cheap quote for mortgage payment protection is to shop around and go to an independent provider. Not only will you make huge savings when compared to going with a high street lender, but you should also benefit from expert advice.

If you are concerned about the recent bad publicity that the sector has earned then there are some factors that have to be taken into account. Firstly, it is not the product itself that is at fault but those few providers who get greedy and put huge profits ahead of the consumer’s best interest. When it comes to pointing out those who have been known to mis-sell policies in favour of high profits they include the well known high street banks and lenders and this alone should tell you to go to a specialist standalone provider for your mortgage payment protection insurance.

Along with high premiums, research from organisations such as the Financial Services Authority has shown how some of the high street lenders know very little when it comes to recommending and selling policies, leaving some consumers with a worthless policy when it comes to claiming. A standalone provider will usually deal just in protection policies and as such can give excellent advice along with a quality product.

By Simon Burgess

What is Mortgage/ Payment Protection Insurance?

2008-10-20T17:19:00.000-07:00

Should I have this type of insurance?

Payment Protection Insurance is not compulsory, although it can be a condition of some loans.
Payment protection is a voluntary debt cancellation program which can cancel your loan balance or your monthly loan payment. The fee is based on the monthly outstanding loan balance and can be added to the monthly payment or even at the end of the loan period in some circumstances.
You can get policies which cover bills, other than mortgages, in the event of illness or unemployment - such as credit card and car loan payments.

Whilst you are in good health and have a job, paying off your home loan or mortgage might not be a worry to you.

Consider though, what if your circumstances changed overnight. Maybe you lose your job or have an accident that leaves you unable to work. A loan for your home, auto or other major purchase could represent a significant burden on your family if you were to become disabled or even die. Not being able to make the mortgage or other loan payments could make a difficult situation even worse for your family.

Many people never consider Payment Protection Insurance when taking out their home loan. Many think that they will be able to rely on your savings or maybe help from the State to pay the mortgage if you are unable to work - but research has revealed that for the most borrowers would find that these routes would be inadequate to cover the loan payments.

It is considered that for people who might have stretched themselves financially with a mortgage or with loans, it is probably even more important to be covered in the event of unforeseen unemployment.

The downside is that premiums can be expensive and adds to the cost of the loan. People who are stretching themselves to meet the loan costs tend to opt out of payment protection insurance because they are at the limit of their budget already. This can lead to a ‘catch twenty two’ situation where payment protection is advisable, but unaffordable!

Good policies will cover any bills related to your loan or mortgage - including interest and repayments. But anyone with a mortgage or loan should consider taking it out unless you are absolutely secure in your job or you are not going to have a serious accident!

Generally, a good Payment Protection policy will start to pay one month after you are out of work (either through illness or job loss). Generally, policies pay out for 12 months. It is thought that people will have found other employment or recovered from illness within this period. However, some policies will cover up to 120 months payments – normally within a set amount say, for example, up to $120,000. This, of course, is likely to be reflected in the cost of the premiums.

Most insurers will cover either the main income provider or include a second person named on the loan or mortgage.

Once you tell your provider that you're out of work and this is verified, your insurance payments should begin, typically after around one month without a salary. It is usual in most cases that payments are made directly to your mortgage/ lender, although in some cases payments are made to the customer.

Most people tend to buy Payment Protection Insurance from their mortgage/ lender at the time of the transaction or if they go through a broker/adviser - through that broker.

However, Payment Protection Insurance can be bought as a stand-alone product from any provider. Watch out for lenders who insist that you should take their insurance.
Go elsewhere and shop around.

Whilst the author endeavours to ensure the accuracy of the information contained within this article, you are reminded that this is only a guide and you should always check with local professional before undertaking any work based herein.

By Phil Ray

Mortgage Payment Protection Insurance

2008-10-20T17:17:00.000-07:00

A mortgage is often the single biggest financial commitment that many people make during their lifetime, yet fewer than half of all residential mortgage holders choose to take on protection of their mortgage repayment ability with mortgage protection insurance.

Mortgage protection insurance, or mortgage payment protection insurance, is a form of insurance that ensures mortgage repayments are met should the mortgage holder become unemployed, fall critically ill or be unable to earn income due to an accident. This type of protection insurance product is quite cheap to maintain, and allows mortgage holders to set an insurance amount for monthly protection pay-out that covers mortgage costs and additional expenses up to a set percentage above mortgage outgoings.

Most mortgage payment protection insurance policies are strict on protection insurance claims. For instance, should the mortgage holder become unemployed through their own free will, then they would not be covered by the mortgage payment protection insurance policy. However, redundancy does qualify for payment through the protection insurance policy, providing that the mortgage holder actively seeks new employment. Additionally, mortgage protection insurance may not pay out if the claimant takes on voluntary or part-time work, although the protection insurance terms & conditions relating to this area will vary with each type of mortgage payment protection insurance product.

Typically, mortgage holders will have to endure a mortgage payment protection insurance qualifying period before receiving payment protection pay-outs. The qualifying period on mortgage payment protection insurance policies is normally 90 - 120 days. If the mortgage holder is still eligible for mortgage payment protection insurance after this period, then protection payments are commenced on a monthly basis.

Insurance companies often require holders of mortgage payment protection insurance to renew their mortgage protection insurance claim every month by completing a form. Sometimes the insurance companies will request evidence from the mortgage holder so they can evaluate the mortgage holder's eligibility for the continuation of mortgage protection insurance payments. This could be a doctor's note of illness or copies of job applications if claiming mortgage payment protection insurance pay-out because of redundancy. Mortgage payment protection insurance pay-outs are normally paid directly into the mortgage holder's bank account one month in arrears.

Pay-outs on mortgage payment protection insurance are often limited to a set insurance period. Depending on the insurance company, monthly protection payments over six months or twelve months from the first mortgage protection pay-out is normal. As two out of every ten people who are made redundant take over a year to re-establish themselves in a new job, mortgage payment protection insurance could mean the difference between keeping your home or losing it.

By Gary Tallon

Mortgage Protection Insurance

2008-10-20T17:11:00.000-07:00

If you're in the market to buy a home you'll know that this is probably the most important and significant financial outlay you'll ever have in your life. What you might not be thinking about is that your hard earned home can be taken away from you in a flash. Of course, we know people can lose them, but we never think it's going to happen to us. Yet, people lose jobs or fall ill every day and are unable to make their mortgage payments. You can avoid this if you have mortgage protection insurance.

Mortgage protection insurance can protect you if you lose your job. It also protects you if you become ill or have an accident that keeps you from working. Your mortgage protection insurance ensures that payments of your mortgage will still be met. This means that you can turn your attention to getting well or getting a new job rather than worrying about how your mortgage is going to be paid. Even better, this type of insurance is easy and fairly inexpensive to set up.

How Mortgage Protection Insurance Works

Mortgage protection insurance simply protects you against loss, similar to what your car insurance does for you when you drive or what life insurance does for your loved ones should something happen to you so that they're protected. Mortgage protection insurance pays your mortgage payments every month, usually for a period of up to 12 months from the date you start using your protection plan. This can be different depending on the cover plan you choose, and depends on your circumstances.

Mortgage Protection Insurance Cost

Usually, mortgage protection insurance is quite inexpensive. In fact, you can pay as little as £2.15 a month for it. The actual cost of your payment will depend on how old you are, how big your mortgage is, and what type of cover you need.

For example, if you're 25 and your monthly mortgage payment is £400 a month, it will cost you £8.60 a month for full coverage. At 50 with the same mortgage payments, your payment would be £19.40, so you can see that rates would rise with age.

One benefit to this type of cover is that your payments are backdated to the first day you are unemployed because of your situation, whether it be illness, injury or layoff, for example. Therefore, even if you've had to wait a month or two for cover to take effect, the full amount from your original claim will be paid to you or your mortgage company beginning on the first day of eligibility.

Mortgage Protection Insurance If You Are Self-Employed

If you're someone who works for yourself, you can also take out a mortgage protection insurance plan. However, this type of involuntary unemployment cover will only apply to you if you have had to stop trading permanently, not if you're having a simple lull in work. However, if this could be you, you should seriously think about taking out mortgage protection insurance.

By Steven Pritchard