An important safety net for people who have a mortgage
You’ll already know how important it is to protect your home and its contents, but it’s also important to think about how you might pay for your mortgage should the worst happen. Mortgage payment protection insurance is an important safety net for people who have a mortgage.
It provides peace of mind knowing that you will still be able to meet your repayments even if you ex-perience a sudden change in your circumstances. This takes away some of the worry involved by providing you with the means to pay your mortgage until you get back on your feet again.
Prevent your home from being repossessed until you recover
It can help you meet your mortgage repayments if you lose your job, are made redundant or are un-able to work due to an accident or illness. For most of us, our mortgage payment is the biggest monthly outgoing we have, and almost certainly the most important. The idea of not being able to make our mortgage repayments and what might happen if we don’t is something no one likes to think about.
Finding ourselves unable to pay our mortgage through no fault of our own – the result of an illness, an accident or involuntary unemployment – is likely to be a worry for many people. Mortgage pay-ment protection insurance can help prevent your home from being repossessed until you recover your health if you have fallen ill, or find a new job if you have become unemployed.
Left wondering how you’re going to pay the bills
You may not be covered if you choose to take redundancy voluntarily, or if you decide to resign from your job of your own choosing, for example, so it’s important to check the conditions of any policy carefully before you sign. Some mortgage protection insurance policies also cover accident, sick-ness and unemployment in one, and are known as ASU policies.
Unless an employer offers a particularly generous scheme for sick pay, it’s unlikely many of us would be in a position to continue paying our mortgage in the medium to long term without some kind of additional support. If you suffered an injury or illness that prevented you from working over a period of weeks or months, you could be left wondering how you’re going to pay the bills.
Understand what is and isn’t included before you buy
In some cases, it is possible to receive government support when it comes to helping with mortgage payments but this is very much dependent on the circumstances, and support packages provided in this way will more often than not cover the interest you owe but not the full cost of the repayments themselves.
Insurers offer a variety of mortgage payment protection insurance policies and it’s really important that you understand what is and isn’t included before you buy, and also to plan for any shortfall in cover you might come across in the long run too.
Monthly repayment
Moneyfacts highlighted a scenario whereby a homeowner borrowing £200,000 on a 30-year mort-gage may have been looking at a rate of 3.5% and a monthly repayment of £898 during mid-September. But at the time of writing this article on 5 October, this is more likely to have risen to a 5.5% rate and a monthly repayment of £1,135.
On the morning of the Mini-Budget there were 3,961 deals available, compared with 2,262 at the start of October, a 43% fall, according to Moneyfacts.
Long-term cover if you could never work again
There will be a waiting period attached to a policy, which means most policies do not commence un-til the period specified has passed, and assuming you have still been unable to return to work within that time. Depending on the waiting period, you may still need to make one or two mortgage pay-ments that are likely to need paying in the meantime.
It’s also important to remember that mortgage protection insurance isn’t always there to help you pay your mortgage forever. Some policies provide cover for up to two years while others will offer you cover for 12 months or more. Some accident and sickness policies will agree to meet your re-payments until you reach retirement age; these normally come at a higher cost to you but offer a long-term cover if you could never work again.
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