The largest financial debt for most households is usually the mortgage. If you cannot work through illness, an accident or redundancy, then it will probably become difficult to continue paying the mortgage payment each month. You could receive government benefits but these are very low, and may not be enough for you to keep up with the mortgage repayments. If you cannot pay the mortgage your home could be at risk of repossession.
The solution: Mortgage Protection
Mortgage protection insurance can cover your mortgage payments whilst you are off work.
Alternately you can take out income protection insurance that pays a percentage of your salary when you are off work. The money paid out can be used for anything, including the mortgage.
Mortgage insurance protects you if you are sick or injured. Some policies also include cover for redundancy as well.
What it pays
Mortgage protection insurance pays a set amount each month normally for a period of up to 24 months. The majority of people who lose their salary through sickness or an accident return to work in less than two years. If you have a critical illness that lasts longer than two years, then you may have difficulties when the mortgage protection insurance payments stop, but you can take out an insurance policy that will cover you for a long-term critical illness.
The waiting period
Most policies will have a set period before payments start. This can range from 30 days to 180 days so check what this is, and try to ensure you keep enough savings to cover this initial period in the event you make a claim.
How much does it cost?
The cost of mortgage protection insurance varies depending on your age, the level of your mortgage payments and the features of the policy. Some jobs are regarded as high risk and people working in these occupations will pay more for mortgage insurance.
If you have certain pre-existing health conditions, you may not be able to take out a policy so this should also be discussed with your insurance broker. Be open and honest with your broker as they are here to help you.
Longer waiting periods in the policy will be cheaper than shorter periods. If your employer has generous sickness benefits, then a longer waiting period may be appropriate as you could rely on your employer’s payments until the insurance payments start. If you have savings, then you may choose a longer waiting period.
A 30-year-old man could pay as little as £12 a month and a 50-year-old £18. An insurance broker can find the best policy to suit a person’s circumstances at a competitive price. If you live in London where the average mortgage is higher than the rest of the country, then premiums will be more expensive whereas our local area of Warrington in the North West will certainly be cheaper. We can cover people from anywhere in the country.
What is not covered?
There is usually a period of several months after purchasing a policy before claims will be considered. This is known as the exclusion period and will be longer for redundancy cover. This is to prevent people taking out cover when they know there is a good chance they will be made redundant soon.
Where to buy mortgage protection insurance
To buy mortgage protection insurance talk to one of our insurance brokers here at Ascot Mortgages who will discuss all your insurance options then find the best policy to suit your individual circumstances.