As a nation of homeowners, we are particularly vulnerable
to the effects that accident, sickness, or unemployment
could have on our ability to meet our monthly mortgage repayments.
In view of this, it is quite alarming to note that of the
11 million mortgage borrowers in the UK, only 20% currently
have any form of independent insurance to protect their
mortgage repayments in the event of accident, sickness,
or unemployment.
A large number of borrowers wrongly assume that State Benefit
will protect their mortgage repayments if they are off work
sick or lose their jobs. But in actual fact, only 30% of
people who put in a claim for State Benefit in respect of
their mortgage repayments receive any help. This is because:
- If you took out your mortgage on or after 1 October 1995
you will not receive any State Benefit for the first nine
months of sickness or unemployment.
- If you took out your mortgage before 1 October 1995 you
will not receive any State benefit for the first two months.
After that, you will, subject to eligibility, receive 50%
of the full entitlement for the next four months.
- If you and/or your partner have more than £8,000
in savings, you will not receive any State benefit. Restrictions
also apply if you have more than £3,000 in savings.
- If your partner works for more than 16 hours a week,
you will not be entitled to State Benefit.
Even for those who are entitled to State Benefit, this
assistance only applies to the interest element of your
mortgage repayments. Any capital repayments or any premiums
for associated life cover/savings vehicles are not covered.
If you fall behind with your mortgage repayments and cannot
repay the debt, you could end up losing your home. That's
why the Council of Mortgage Lenders encourages all mortgage
borrowers to consider taking out mortgage payment protection
insurance - also known as accident, sickness and unemployment
(ASU) cover.
This type of protection will help you to cover your mortgage
repayments and any associated insurance premiums for up
to a year if you are unable to work due to unemployment,
accident, or sickness.
- You choose the amount of cover you need per month
- You choose the type and level of cover required
- You choose how long you want to wait before claims are
paid
- You pay a low monthly premium
- The policy pays a fixed monthly benefit for up to 12
months if you are unable to work due to accident, sickness,
or unemployment.
You will normally be able to make a claim if:
- you have lost your job in circumstances beyond your control
- e.g. redundancy - and are registered as unemployed, or
- you are unable to work due to a disability/illness and
you are under the regular care of a doctor or consultant.
For more information on protecting your mortgage repayments,
visit
the UK Mortgages & Remortgages website.
About the Author
David Miles edits a number of finance websites, including
TheCashClinic.com
- a UK Personal Finance Portal.
