Payment protection insurance has been getting a lot of bad press lately, so many homeowners are hesitant to get mortgage protection. This leaves them vulnerable to losing their home if they suddenly lose their income.
Mortgage protection can help you keep making your monthly mortgage payments if you can't work because of an accident, illness, or being laid off. Even though there are problems in the industry and a lot of confusion because the products don't have clear differences, mortgage protection can be a very useful product. You do have to make sure it's right for your situation, though, before you sign up for it. This is because there are exclusions that mean it's not right for everyone.
Even though exclusions can be different for each provider, there are some that are always the same. You wouldn't be able to use it if you were self-employed, retired, only worked part time, or had a long-term illness. You do have to read the fine print to see if there are any extras and to find out about the policy's terms and conditions, which can also be different.
Most policies start paying out between day 31 and day 90, and then continue to do so for 12 to 24 months, depending on the provider. The premiums for mortgage protection can also vary a lot, and the cheapest premiums will come from an independent specialist provider. When you buy the policy, the premium will depend on how old you are and how much your monthly mortgage payments are.
A specialist provider will also have experience selling the products, so you can take advantage of their knowledge by reading articles and facts about the insurance they sell. They will also give you a document with the "key facts" and explain the "exclusions" in plain English so you can make a decision before you buy. Most mis-selling happened because people didn't know about the exceptions. In March 2008, it is hoped that it will be easier to buy mortgage cover and payment protection products.
The Financial Services Authority is putting together comparison tables, which they hope will make buying insurance a little less mysterious. The customer will be able to answer a series of questions, and depending on how they answer, they will be able to buy the best type of insurance for their needs. Along with this, the tables will show what the policy doesn't cover and how much the whole thing will cost. If mis-selling is to stop, coverage needs to be made clearer, and right now, the only thing working in the consumer's favour is an independent specialist. Never be tempted to take out the cover that is offered alongside your mortgage at the time of taking it out, you do not have to buy it this way, you can choose to go independently for your mortgage protection cover.
