Would You Benefit From Taking Out Mortgage Insurance?

While this question should, of course, be the first thing you ask yourself before buying mortgage insurance, many do not even give it a thought. Usually those who give no consideration to the suitability of a policy are those who take it alongside the mortgage at the time of borrowing. Of course, many put trust in the lender – after all, the lender got them the cheapest loan so why not the insurance to protect it?

While the high street lender may get the best deal for the mortgage this does not mean they can do the same for the protection for the mortgage. In fact, buying mortgage cover alongside the borrowing is often the most expensive way of doing so and the most risky. Often very little information is given regarding the terms and exclusions that come with a policy. This means the consumer is unaware of the exclusions and could be buying a very high-priced policy that they cannot claim against if they find themselves out of work.

Some lenders might ask that you do take out some form of protection for the money you are borrowing but it does not have to be taken at the same time. Consumers do have the right to shop around for a policy and your mortgage should not depend on taking the cover offered by the lender. By choosing to shop around for the cover you can make huge savings on the total amount you pay. A specialist lender will give an instant quote for mortgage protection based on the amount you wish to cover and age of the policy holder. Along with this, they provide all the information needed for the consumer to be able to choose whether a policy would be suitable.

While providers of mortgage protection can add in their own exclusions there are some that are common to most policies. Individuals who are self-employed, retired, have a pre-existing medical condition or who are not working in a full-time position could find cover would be useless. This is not black and white; for example, self-employed individuals who had to ceased trading altogether through involuntary unemployment could still benefit from a policy. And those who have an illness that has not reared its head during the last two years could also benefit. It is essential to carefully check the policy details to make sure an exclusion would not apply to you.

After taking out suitable cover the policy holder would have peace of mind if they lost their income through sickness, accident or unemployment. Their policy would provide a tax-free income once they had been incapable of working for between 30 to 90 days. The money received would cover the monthly repayments for the mortgage and related outgoings such as insurance.

Those individuals who think they could rely on the state helping out in their time of need could be in for a disappointment. While the state does offer help, you have to qualify for it. The help the state provides depends on how much money you have in savings; having over £8,000 means you would be expected to use this money to support yourself. Also, if you have a partner living with you who is in full-time work then you also would not be eligible for help, and the help that is given will only pay towards the interest part of the first £100,000 of your mortgage. So a far better solution to relying on the state is to take out mortgage insurance from an independent provider.

by: Simon Burgess

About The Author

Simon Burgess is Managing Director of the award-winning British Insurance (http://www.britishinsurance.com), a specialist provider of low cost income payment protection insurance (PPI), mortgage payment protection insurance (MPPI) and loan payment protection insurance.

Ensure Loan Payment Protection Insurance Is Not Included With The Loan

While you should certainly consider taking out loan payment protection insurance, because it can be a valuable asset, be careful to avoid taking out a policy with the same company that provides your loan. Sometimes high street lenders add on the protection policy without asking the individual if they want or need the cover. Taking a policy this way not only adds enormous expense to the cost of the loan, but can result in you wasting money on a useless policy that would not pay out should you claim.

High street lenders are known to charge premiums that can almost double the cost of a cheap loan. As well as adding the total cost of a policy onto the amount you are borrowing, they then top it off and add interest onto the total amount. Those lenders who try to persuade the borrower that the loan relies on taking out loan payment insurance protection are not being truthful. Some might ask that you do protect the amount you are borrowing, but you do not have to take the payment insurance with the loan provider. You can choose to shop around with a specialist provider and compare cheaper quotes.

An independent provider could save you up to 80% in comparison with a high street lender. At the same time a standalone provider can offer all the advice you need to make sure you know the product is suitable for your circumstances. For example, you have to watch out for exclusions such as being of retirement age, suffering from an ongoing illness, only being in part-time work or being self-employed. These are common exclusions but there are exceptions. For instance, those who are self-employed could still be eligible to take out a policy if they have to cease trading through no fault of their own. And if you have a pre-existing medical condition but it has not resurfaced within the last two years then a policy could be suitable.

Loan protection cover would begin to provide the policy holder with a tax-free income once they have been out of work for a defined period of time. The exact time period depends on the provider but is usually between day 30 to 90 of being continually unable to work. You would then have peace of mind for between 12 to 24 months, as indicated in the key facts of the cover.

You also have to be very wary when taking out a loan online. Loan payment protection insurance can also be added in this way. A recent survey by a popular watchdog revealed that out of 41 quotes for loans, 24 of these had included the insurance. The majority of them also gave separate quotes for both with and without insurance. When applying for your quote online very often you have to un-tick a box yourself or click to a different place if you do not want insurance along with the loan, which is often confusing. However, some lenders have now agreed to change the pre-ticked box method. Always make sure you read the FAQs page when applying for a loan online so that you know whether protection is being included in the cost of the loan.

by: Simon Burgess

About The Author

Simon Burgess is Managing Director of the award-winning British Insurance (http://www.britishinsurance.com), a specialist provider of low cost income payment protection insurance (PPI), mortgage payment protection insurance (MPPI) and loan payment protection insurance.