By Simon Burgess
When it comes to buying mortgage protection insurance you have to take care. Mortgage cover is usually offered at the time of taking out the borrowing. However, by taking this option you could end up paying far too much. If you choose to go independently for the cover with a specialist in payment protection you can save hundreds or even thousands of pounds on the insurance.
Mortgage protection insurance is taken out by those who fear they may be unable to work sometime in the future. An individual could become unemployed by way of involuntary redundancy; suffer an accident; or an have a long term illness. However while their income would be lost the mortgage repayments have to be kept up. If you were to get behind on them then you risk losing your home to repossession. However for a small premium each month you could have a tax free income which would ensure you have the money needed should you become unable to work .
Policy terms, conditions and benefits can vary but in general they will start to provide you with a monthly lump sum from between day 30 and 90 of finding yourself unable to work. It would then carry on for between 12 and 24 months depending on the provider.
The terms and conditions are essential to deciding if mortgage protection insurance would be suitable for your needs. Cover is not suited to the circumstances of all due to the exclusions. There are exclusions which are familiar to the majority of payment protection policies and ones that can be added in by the provider. You have to check very carefully if you are self-employed, suffering a pre-existing medical condition, are retired or if you only work in a part time position. However these can vary slightly between providers so always double check and delve deeper into the actual wording of the policy before choosing.
It is worth considering cover with an independent provider as opposed to taking the protection offered alongside the borrowing. This is because many high street banks and lender have been named and shamed in the recent and still ongoing mis-selling scandal that has occurred within the payment protection insurance industry. Many companies have received fines for slap dash sales practices and for failing to give adequate information at the time of selling cover. Cover has been sold to those who could not hope to claim and were not made aware that there are exclusions.
Since the scandal came to light, some changes for the better have been seen and many firms are making positive changes to the way they sell mortgage protection insurance. However there are also some that are still carrying on in their old ways and during 2007 over 4,000 cases of mis-selling were investigated. The Financial Services Authority insists they will do everything in their power to improve the way insurance is sold.
The key to buying the right mortgage protection insurance is to shop around for the cover and ensure you read the small print carefully.
About the Author: Simon Burgess is Managing Director of the award-winning British Insurance, a specialist provider of
mortgage protection insurance
, loan protection insurance and income protection insurance.