Can you afford not to have mortgage payment protection?
Simply consider the following information:
Key Considerations
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90 families have their home repossessed each day, the majority
due to the financial problems associated with unemployment.
-
One in three people aged between 25-34 have experienced unemployment
for a period in excess of one month.
-
Almost one in five working age households (3.4 million) have
someone who is currently unemployed.
-
Today in Britain there are almost 1,000,000 persons who are
registered as unemployed.
-
Every day 500 people in the UK become unemployed. 60% of unemployed
men and 45% of unemployed women will be out of work for six
months or more.
-
Every adult in Britain is five times more likely to suffer
a serious disability than die before the age of 60.
-
Today in Britain, 2,900 people will start claiming state disability
benefits.
-
1,800,000 people in Britain are already disabled and have been
unable to work for 12 months or more.
What cover is available under this product?
This Mortgage Payment Protection Insurance has been designed to
overcome the consequences of unemployment and disability and to
provide the following benefits:
- 3 MONTHS FREE COVER for both new and existing mortgage borrowers.
- Highly competitive premiums starting at just £2.45 after
the FREE COVER period.
- Back-to-Day-One benefits payable after only 30 days.
- Tax free benefits are payable for up to 12 months.
- You can choose Unemployment only cover or disability only cover.
- The self-employed and contract workers are also eligible for
cover.
- This Mortgage Payment Protection Insurance can be transferred
from one mortgage lender to another.
- Simple application procedure and convenient monthly direct
debit payments.
State benefits
You can no longer rely on the Government. State benefits for
a single person are currently under £60 per week. Could
you manage on that? The typical state benefit for two adults
with two children is £96 per week; the maximum is £134
per week. Could you support your family on this?
Since October 1995 new mortgage borrowers will receive no state
help for the first nine months of unemployment or disability. Existing
mortgage borrowers receive nothing for the first two months, only
50% for the next four months and then full benefit for mortgages
of up to £100,000 provided they qualify for Income Support.
The Government themselves estimate that 70% of mortgage borrowers
will not get Income Support due to savings, income, or a working
spouse or partner.
In 1998 alone, the introduction of a new incapacity criteria resulted
in 102,000 claimants being turned down for state benefit. An independent
doctor (not your own) will carry out your assessment and you must
be incapable of doing any work, not just your normal job, to qualify
for state benefit.
Choosing a policy
You may be the main earner and your family may rely on your income,
so the wider the circumstances your policy covers the better. However,
you should look at your personal circumstances before making a decision
about which policy to choose. There are many different ones available,
offering anything from life insurance to cover for disability sickness
and critical illness. You may think Mortgage Payment Protection
Insurance is a good idea but feel your job is secure, so don’t
see the need for paying out for the full package. If this is the
case then think about insurance to cover your health. Permanent
Health Insurance (PHI), for example, provides a monthly income if
you are unable to work due to disability or ill health which, statistically,
if far more likely than death so may be a better option than extra
life assurance.
Always look at the small print before you commit yourself to a
policy, as there may be restrictions built in. Most policies won’t
pay out in the first six months of taking it out. If you make a
claim after this period, you should receive a payout after 60 days.
The benefit is usually calculated on a daily basis and paid one
month in arrears, so for the first two months you will have to meet
the mortgage payments yourself. Some existing policies delay payment
and will only issue funds after 90 or 120 days, although new policies
should all payout after 60 days.
Another factor you should consider is any exclusion in a policy.
Insurers are likely to exclude any medical conditions you have had
before you take out the policy. Others might exclude stress, back
problems and pregnancy.
You should also check whether you are covered if you work part-time
or are on a temporary contract. It is a good idea to investigate
your insurer’s attitude to unemployment. For example, if you
undertake any training while unemployed, dose your insurer expect
you to be actively looking for a new job at the same time?
THE COST
The price of a Mortgage Payment Protection Insurance policy is
usually based on the number of exclusions featured, and in some
cases on the level of commission the insurer is receiving. Prices
can vary widely with quotes ranging from £3 to £9 per
£100 of cover, so it’s best to shop around before you
part with our money.
However, as a rough guide, the Mortgage Payment Protection Insurance
benchmark policy suggests a premium level around £4.50 for
each £100 of cover. If you decide to buy your Mortgage Payment
Protection Insurance cover directly from the broker or insurance
company, you may benefit from introductory discount and lower rates.
When choosing an Mortgage Payment Protection Insurance policy,
many homebuyers opt for the policy offered by their lender. Especially
if the insurance is free for the initial period of the mortgage.
This might seem attractive but you should consider the package as
a whole. While you may not have to keep the policy when the free
period comes to an end, you will have to pay for it if you decide
to take it on and it may not cover everything you need. Make sure
the cost is competitive too.
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