Mortgage protection
When taking out a mortgage some people balk at the idea of adding a payment protection insurance policy to cover the cost of their mortgage should they become ill or be made redundant. After all why should they pay out an extra £5 per £100 of mortgage each month to obtain mortgage protection when they might never need to claim on the insurance? For some, it just seems like another way of squandering their hard-earned money.
But, the truth of the matter is that our health and our job security is by no means guaranteed. Illness or temporary disability due to an accident could strike us at any time, keeping us off work for several months. By the same token, redundancy is now much more likely than it was just 20 or 30 years ago as businesses continually look for ways of cutting costs and doing more with less just to enable them to compete.
Neither illness or redundancy can be predicted with any certainty, but neither can they be discounted. If the worst were to happen, how would you meet your mortgage repayments every month? The last thing for sure you would want to cope with when you're ill or looking for a new job is trying to work out how to stop your home from being repossessed; sadly, repossession is a fact of life for hundreds of people in this country everyday.
The benefits of mortgage protection
Mortgage protection is an insurance policy that pays out a monthly sum to the policyholder in the event of illness or unemployment through involuntary redundancy. The amount insured under the protection policy can be configured to cover the mortgage plus other bills up to a certain amount above the mortgage repayments. This will give the policyholder some breathing space for recovery from illness or time to find a new job without worrying about their home being repossessed.
If you are considering taking out mortgage protection it is worth bearing in mind that many protection insurance policies require a three-month qualifying period, during which time you will have to cover mortgage repayments from your savings. It is also likely that once your protection payments kick in that you will have to renew your protection insurance claim every month in order to receive the pay out. In some instances, mortgage payment protection companies will need evidence of your inability to work through a doctor's certificate or evidence that you are actively seeking employment via photocopies of job application forms.
Mortgage protection insurance should only be considered as a stopgap solution to illness or redundancy. Most protection insurance will cease paying out after 12 consecutive months, once more leaving you on your own or to claim on different types of insurance polices such as income replacement insurance.