Should your circumstances change, and you are no longer able to afford your mortgage payments, you risk losing your home. We take a look at mortgage protection insurance and why it is so important to ensure that you have adequate cover in place.
Unable to Make Mortgage Payments
There could be any number of reasons that you are suddenly unable to make your payments including:
- Sickness
- Injury
- Losing your job through redundancy
If any of the above do happen to you and you are unable to work for a period of time, you need to have contingencies in place.
How Does Mortgage Protection Insurance Work?
These insurance policies usually take effect after you’ve been out of work for 30-60 days. That’s the general waiting period. After this point, the insurance provider pays you a set amount each month, depending on the level of protection you opt for. Sometimes the monthly payout will cover the mortgage payment and other bills. You usually have to have the insurance in place for a period of 30-60 days before you claim so it’s always wise to set it up when you take out your mortgage and not wait until such a time as it’s too late.
Mortgage protection insurance is also known as MPPI – Mortgage Payment Protection Insurance. Be careful when selecting the policy as mortgage payment protection will make the payments directly to you rather than to the lender, which is the case with PPI.
What Level of Cover do You Need?
When it comes to the level of protection that you need, this will very much depend on your circumstances – your age, salary, mortgage repayments and your job. A desk job carries less risk than manual labour for example. Therefore, your premiums would be less. The higher your level of cover, the more expensive your monthly payments will be. You will also incur more cost for a shorter waiting period.
Different Types of Mortgage Protection Insurance
Unemployment
An unemployment mortgage protection policy will only pay out if you are unable to work owing to redundancy.
Accident and Sickness
This type of policy will cover you if you are unable to work because you have fallen ill or had an accident which has left you injured.
Combined
For a higher premium, a combined policy will cover you both in the event of redundancy and accident/sickness.
If you are self-employed and looking for cover, there are policies available. It is perhaps even more important to be covered if you are self-employed.
While not compulsory, what would you do if you were no longer able to work? If you have savings, these may only last so long. You don’t know how long you will be out of work for. You could also consider income protection, critical illness cover and life insurance but you need to be sure that you are well-advised and that you are taking into account your personal requirements, and that of any dependents you might have.
Why Seek Professional Mortgage Protection Advice?
You could research and choose mortgage protection insurance on your own merits but, it is advisable to consult with a professional who has experience of the whole market and access to products that you may not discover when carrying out your own research. They will be able to help you find the most suitable insurance and understand the terms and conditions and exactly what you will be covered for, when cover starts, when it will pay out and if it will be enough to cover your monthly liabilities.
For more advice and information, please get in touch with our team and we will only too happy to help. You can contact us on 01934 756717.