Mortgage Payment Protection

Are you protected?

Is your employer protected against the economic downturn resulting from the banking crisis? Will they cut costs and make employees redundant in order to save the business? If you were made redundant do you have sufficient savings to pay your mortgage and related payments whilst looking for a new job? What if you took ill or had an accident resulting in you being unable to work for 1-12 months, would you receive enough sick pay or statutory sick pay to cover your mortgage and related payments?

Can you relate to the Grant's circumstances below: -

Peter and Emma Grant have a mortgage of £160,000. Peter earns £40,000 and has been employed by the same firm for over 5 years, whilst Emma works part time earning £11,500.

Completely out of the blue Peter's firm makes him redundant as they've lost a major export order, totally unexpected. Peter and Emma are totally devastated, but they recall they had taken out mortgage payment protection insurance (ASU) to provide cover of £950 per month.

Seven months later Peter finds a new job, but thanks to the insurance policy the Grants received a total of £5,700 during this dificult time.

What is 'Mortgage Payment Protection' Insurance

Mortgage payment protection insurance allows the policy holder to cover their mortgage payments if they experience an accident, fall sick or lose their job depending on the type of policy taken. There are three types of policy, these are:-

• Accident, Sickness and unemployment
• Accident and Sickness only
• Unemployment only

What state benefit is available when made unemployed?

From 5th January 2009 the Department of Work and Pensions revamped its highly criticised Income Support for Mortgage Interest scheme. Previously the Department for Work and Pensions provided support after 39 weeks (9 months) from the date of redundancy for payment of mortgage interest this waiting period will now be reduced from 39 weeks (9 months) to 13 weeks (3 months) however, support still only includes the interest portion of your payments. Therefore you would still need to make the capital payments yourself and any related payments such as buildings and contents insurance, life assurance etc.

Is this type of insurance suitable for me?

If you can answer yes to all of the points below then this type of policy will be suitable: -

• In permanent full-time continuous employment/self-employment (minimum 16 hours per week)
• Employed for at least 6 months
• Aged 18-60 years
• Living in the mortgaged property, and living in the UK
• Not aware of any impending unemployment
• In good health for at least 6 months

What is not covered by such a policy?

Accident/Sickness

• Anything you have been treated for in the last 6 months
• Any self inflicted ailments or injuries
• Nervous disorder/stress - unless diagnosed by a consultant
• Back problems - unless there is substantial radiological evidence of injury or damage

Unemployment

• Unemployement due to misconduct at work

Things you should know!

Waiting period

The length of time you will need to be out of work before a claim can be made. The waiting period is 30 days, this is to make sure that circumstances for which the claim is being made are not simply temporary. After this time, and once the claim is agreed by the insurer, money will be paid by the chosen policy excess day explained below.

Excess period

The length of time you will need to wait before payment can be made. There are four options:-
Day 1: - where the payout will be back dated to the first day of any claim (after the 30 day waiting period). This is more expensive than the other three options.
30 day/60 day/90 day: - where the payout excludes the first 30/60/90 days. This may be suitable to you if you are already covered for an initial period of sickness by your employer or if you will be given notice of a month or more in case of unemployment.

Exclusion period

The length of time you will need to have had such a policy before you can make a claim for unemployment
New mortgage - if the policy is started along with a new mortgage then the exclusion period is 60 days/2 months
Existing mortgage - if the policy is started seperate to a mortgage then the exclusion period is 90 days/3 months
There is no 'exclusion period' restriction on accident and sickness, for this you will be covered immediately subject to your chosen excess period.

When will I receive the money?

The insurer will payout cover after your chosen excess period, some insurer's payout a daily amount (every day, adding up to the monthly cover requested) whereas others will payout a full months cover at the end of the month. This cover will go on to be paid for a period of up to 12 months, whilst you remain out of work.