The cost of a mortgage insurance policy will also vary depending on the provider. So check around and get several quotes to make a comparison. However, when comparing the quotes also check the key facts that come with the policy. These will give you important information regarding the policy such as any exclusions and the start and end times.
A mortgage insurance policy can be taken out to ensure that if you were to be made unemployed you would have an income. It can also be taken to safeguard against the possibility that you might suffer an illness or accident that meant you were unable to work. It can also be taken to cover all three possibilities. The premium charged for cover would be based on the level of cover, your age and how much your mortgage repayments are each month.
The majority of policies would begin after a period of you being unemployed continually or of being unable to work. Usually this is between the 30th and 90th day. Some providers can backdate the policy to the first day of becoming unemployed or of being declared unfit. The policyholder would then receive an income that was tax-free for between 12 and 24 months depending on the provider.
The income that a policy provides would ensure that you would not be struggling when it came to financing your repayments. It would allow you peace of mind and security, which leaves the individual to be able to concentrate on recovering or to find another position. If you were to get behind on your mortgage by just a couple of months, the lender could start repossession proceedings. This is especially so if you cannot show you are able to catch up on the arrears while maintaining the mortgage.
Mortgage insurance along with the rest of the payment protection family has come under scrutiny during the past few years. This started in 2005 when the Citizens Advice made a super complaint to the Office of Fair Trading. They, along with the Financial Services Authority, began investigating and this led to several high street names receiving fines. Faith in mortgage protection insurance dropped when a mortgage firm faced fines for mis-selling. Not only did the company receive a fine but the Chief Executive also had to pay a personal fine.
However, it is essential to remember that the products are not to blame for the mis-selling that has occurred. Payment protection of which a mortgage insurance policy is one form, can work in the way it was designed. Providing the consumer understands what they are buying, and is given the information needed to decide if cover is suitable, a policy can give protection.
Simon Burgess is Managing Director of the award-winning British Insurance, a specialist provider of mortgage insurance, income protection insurance and loan protection insurance.
