Mortgage Protection Insurance
Now that you have purchased your new home, paid a fortune for the legal fees, surveys and the stamp duty, the last thing you want to think about is incurring any other costs, on top of what you already have to spend.
While it is prudent to keep your costs low on certain things, it is not prudent to cut back on important things like insurance. The insurance in this case is known as mortgage protection insurance, mortgage payment protection insurance, mortgage insurance protection plan, accident, sickness and unemployment cover among others.
Mortgage protection insurance in the UK essentially protects your mortgage in the event of sickness, unemployment or accidents, leaving you unable to work. No one knows what is around the corner. Anything can happen at any time as none of us are untouchable.
In such an eventually it may be unlikely that state benefits will be able to help you as they have stringent rules on when such a benefit is likely to be payable and for how long.
It is likely that your mortgage lender will offer you a mortgage protection insurance policy . Chances are that the way it will be presented to you, is that one policy will cover will suit everyone's needs. However, key information is not taken into account, for example your age, gender or occupation, and it will pay your mortgage and its associated costs, such as home insurance, for 12 months if you lose your job, suffer an illness or accident that stops you working.
Your lender may not offer you the most competitive deal. Some lenders may not provide you with essential information about such policies. One of the biggest failings of lenders offering mortgage protection insurance is not asking about any pre-existing medical conditions as most companies will not pay out under these circumstances.
Some insurance terms
- The benefit period - is the length of time you can claim monthly payments for. These vary from policy to policy. You can select the time period you want to be covered for (1 year, 2 years etc) but the longer you want the cover for, the more expensive the premiums will be.
- An exclusion period or an excess period - this is the time you have to wait to start receiving benefits from the policy after you become ill, had an accident or become unemployed. This can vary from having no exclusion period to 30, 60 or 90 days. In some instances, this can be even longer.
- 'Back to day one cover' - means that the insurer will backdate your payment from the first day you stopped working.
Before committing yourself to a particular provider it is important to read the exclusions on the policy and to compare it with other policies. Look out for policies that offer 'back to day one cover'. Most mortgage payment insurance companies do not pay unless you have been out of work for at least 30 days.
Check to see what benefits you have from your employer. They may already provide you with accident, sickness and unemployment cover. If this is the case, duplicating cover with another provider in unnecessary. Instead you may be able to opt out of the unemployment part of the cover as some providers sell components mortgage protection insurance separately.
Rather than focusing too much on the price of the policy, concentrate also on what it contains as it may not be the right one for you.
As with all types of insurance, you need to shop around to find a good deal. Do some research to see how these policies vary, you will be surprised. Don't take someone's word for it find out for yourself!
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