Mortgage Payment Insurance - Do You Know What it Can Do For You?

By Simon Lance Burgess

Many homeowners do not know much about mortgage payment insurance. However they should find out, as it can a great deal for them if they were to become unemployed or suffer accident or illness that meant they lost their income. In fact a policy could mean the difference between paying the mortgage and time and recovering or finding work with peace of mind or struggling. If they struggled and got into mortgage arrears then repossession and eviction is likely.

Mortgage payment insurance would provide the policyholder with an income which is the sum of money they insured against when taking on the cover. This is what defines the premium you pay each month along with the level of cover and age when applying. You are usually able to take out cover for accident, sickness and unemployment together, incapacity only or unemployment only. Age based premiums mean that protection is now affordable to even first time buyers who have stretched their budgets to the maximum.

Being able to maintain the mortgage is essential because even just one missed payment means the lender will be in touch with you. They will want you to make an agreement to repay the arrears on the mortgage and at the same time assure them that you will be able to continue meeting your mortgage payments. This is highly unlikely if you did not have the money in the first place to pay. You would avoid all of this if you have taken out mortgage protection as you would receive a sum of money tax-free with which to pay your mortgage.

Of course there are other alternatives to mortgage payment insurance cover. However none are as reliable as payment protection. You could rely on any savings or redundancy money you might get if made redundant. Any savings might not last long enough to get you through paying your mortgage and of course you would also need money to live on and pay other outgoings at the same time. You would soon put a big hole in redundancy money if you had to survive off it for many months. You could apply for State benefit but you might not be eligible. You would have to be eligible to claim income support, not have a partner living with you in full time employment or have savings over a certain amount. Even if you are you would only receive help with the interest part of the mortgage and then only up to a certain amount each month. You would also have to wait for many months before seeing any benefit.

Mortgage payment insurance would begin to provide you with the income after the time set out in the terms of the policy. This is usually somewhere between the 30th and the 90th day of unemployment. Some providers would also backdate the cover to the first day of becoming unemployed or of being incapacitated. Once the cover has begun to provide an income it would do so for a fixed period of time and then end. This is usually either for 12 monthly payouts or 24 monthly payouts.

Simon Burgess is Managing Director of the award-winning British Insurance, a specialist provider of mortgage payment insurance.