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If you have dependents then you may also want to consider taking out life insurance. This will pay out a lump sum in the event of your death. Depending on the type of mortgage you have you can choose policies that will pay out a set amount or if you have a repayment mortgage one that will decrease over a period of time linked to your mortgage term.
Critical illness cover
Another type of protection is critical illness cover (CIC), which pays a lump sum if you are diagnosed with a serious illness such as heart attack, cancer, loss of limbs etc. The above policies can be combined into one policy and so save money. Mortgage Payment Protection (MPPI) Another option is mortgage payment protection insurance (MPPI) where if you become unemployed or cannot work due to an accident or ill-health then your insurer will pay you a set amount each month to cover your mortgage repayments for one or two years. Following the wide mis-selling of Payment Protection Insurance (PPI) with loans and credit cards many people are understandably quite wary of taking out this kind of insurance. But MPPI, which is specifically tied to mortgages was not as widely mis-sold as other PPI products and may be suitable for many people.
Another type of protection insurance is income protection (IP) which pays around half of your salary if you can’t work because of an accident or sickness. It will pay out longer than mortgage payment protection, for example until you can go back to work or reach retirement, but it does not usually cover unemployment. It is a more effective way of insuring against ill-health than mortgage insurance as you are medically assessed when taking out the policy and will know in advance what you will and won’t be covered for.
Government help should only be used as a last resort as it will not cover your full mortgage repayments and it is possible you may not be eligible. If you become unemployed you may be able to get state benefits such as Jobseeker’s Allowance or Employment and Support Allowance. If you’re eligible for these benefits you may be able to apply for the Support for Mortgage Interest scheme (SMI). Under the scheme your lender will receive payments from the government covering all or part of the interest on the first £200,000 of your mortgage at the Bank of England’s published monthly average mortgage interest rate. These payments will not cover the capital and will only be paid for up to two years if you are claiming in addition to income-related Jobseekers Allowance. Visit Directgov for more information on government schemes.
Buildings and Contents Cover
The definition of what constitutes Buildings and Contents under a home insurance is commonsense and straight forward. Buildings constitute all domestic buildings within the boundaries of the land, owned by the insured and permanent fixtures and fittings, for example sanitary ware. Contents are portable items, possessions you’d take with you if you move, including carpets and curtains and electrical goods.
*As with all insurances, conditions and exclusions will apply.
*Accident, Sickness & Unemployment insurance typically costs £4.10 a month for every £100 of monthly benefit. This is based on a 39-year-old customer choosing £1,000 of accident, sickness and unemployment monthly benefit with claims paid after a 30-day deferred period. The cost of this insurance depends on a number of factors, such as your age, where you live and your occupation. As a result, the cost you will pay is based on your own circumstances. There are other providers of Short-term Income Protection and other products designed to protect you against loss of income. For impartial information about insurance, please visit the website at www.moneyadviceservice.org.uk
*There are other providers of Payment Protection Insurance and other products designed to protect you against loss of income. For impartial information about insurance, please visit the website at www.moneyadviceservice.org.uk.
Andrew Harrod Financial Services Ltd is an Appointed Representative of Stonebridge Mortgage Solutions Ltd, which is authorised and regulated by the Financial Conduct Authority. Registered Office: 12 Dunholme Road, Gainsborough, Lincolnshire DN21 1XJ. Registered Company Number: 8109370. Registered in England & Wales
“Free initial consultation”. A fee may be charged on application. The actual amount you pay will depend upon your circumstances. The fee is up to 1%, but a typical fee is 0.3% of the amount borrowed.”