After the global housing crash of 2008, homeowners in the US and UK are understandably worried about the consequences of missing a mortgage payment. The fear of losing one’s home is very real, and it can result in more than a few sleepless nights when times are tight. What’s great about mortgage protection insurance? UK homeowners can rely on it!
Mortgage Protection Insurance for UK Homeowners
What happens if you fall ill or you lose your job? While there are often many expenses we can cut out to help, the mortgage is not one of the corners we can cut. Mortgage protection insurance UK, which is also called mortgage payment protection insurance for UK residents, will pay out a certain amount each month.
This is either the cost of your mortgage or the cost of your mortgage and other key bills, such as utilities, if you are unable to make payments because of employment or accident and sickness.
You can opt to get unemployment cover (which provides payments only if you are made redundant), accident and sickness cover or a combination of unemployment, accident, and sickness.
How much will this cost you? Say you earn an average UK salary of £27,456 and pay the average mortgage of about £623, you may pay about £22 (average quote) a month for this cover.
Is Mortgage Payment Insurance Right for You?
It is your call, but having a backup plan in case you become ill, injured or redundant can provide peace of mind. Be aware, though, that you may not be able to get this type of cover if you:
- Have certain pre-existing health conditions. You may be able to get cover, but it will not pay out for claims related to that condition if it recurs within a certain period of time of taking out the insurance (typically 12-24 months).
- Have mental health or back problems. Insurers are often hesitant to cover these very common issues.
- Work in a certain type of occupation. For example, you may not get cover if you have a fixed term contract. When pursuing this type of cover, make sure you clearly explain your employment situation to be sure you will be protected.
What if you cannot get mortgage payment insurance because of one or more of these issues? Do not give up! There are options you can explore, including:
- Income protection. This covers illness or injury only – not redundancy – and it is a bit pricier than mortgage insurance. But it has its upsides despite that: if you have a medical condition and cannot access mortgage insurance, this can deliver that peace of mind you need. It pays about half of your salary, and typically does so for a longer period of time (e.g. until you can return to work or until you retire).
- Critical illness. If you experience a critical illness, this cover pays out one lump sum.
Speak to your insurer about the best cover for you. Knowing you can pay your mortgage even if ill or unemployed relieves a great deal of worry.