The largest debt that most households have is the mortgage. To keep up the monthly mortgage payments usually requires one or more members of the household need to have a full-time job, but what happens if you or your partner loses their job and their income? Would you still be able to afford the mortgage repayments?
The answer to protect your payments is mortgage insurance, as this will pay a monthly sum towards the mortgage when you cannot work.
What is covered by mortgage insurance?
Mortgage insurance pays out if you are unable to work through sickness or an accident. Some policies will also pay if the policyholder is unexpectedly made redundant.
How much is paid out?
The amount paid out is dependent on the type of policy. You can take out a policy to just cover the mortgage repayments, or there are policies that will pay up to 125% of the monthly repayments, which leaves some money left over to pay other household bills.
Payments continue while you are out of work, but there is usually a maximum period of around two years.
When do you get paid?
Before a claim can be made you need to be off work for a specified period. Policies that have shorter waiting periods are more expensive. If your employer has generous sickness benefits, these may cover a long waiting period. There are ‘day one’ policies that have no waiting periods, but these cost more.
Once a claim has been accepted, it can be over 30 days before payments start, though they should be backdated to the claim date.
What is excluded?
• If you have a preexisting medical condition, this will probably not be covered.
• If you know that you are likely to be made redundant when you take out a policy, you will not be covered for redundancy.
• If you are self-employed you can still take out mortgage insurance. Casual workers and those on on a fixed-term contract may not be able to purchase mortgage insurance.
What does a mortgage insurance policy cost?
The cost of monthly premiums is dependent on a number of factors, including your age, how much your mortgage repayments are and the features of the policy.
Some jobs are regarded as more hazardous than others and you will pay more if you are in what is considered a high-risk job. These include construction workers, lorry drivers, deep sea drivers and merchant seafarers.
Are there alternative insurance products?
An alternative to mortgage insurance is income protection, which pays around 50% of your salary if you are sick or injured.
Critical illness cover pays a lump sum if you are diagnosed with a specified serious illness. Mortgage insurance does not pay out if you die, so it is advisable to also take out life insurance.
How do I buy mortgage insurance?
Contact Ascot Mortgages, and we will find you the best mortgage insurance policy to suit your individual circumstances, while also answering any further questions you may have about mortgage insurance.