Despite the bad name that mortgage insurance has earned itself over the last few years it can still be a very worthwhile product to have to fall back on if you should find yourself out of work after suffering from an accident, an illness or if you should be made unemployed by losing your job through such as redundancy.
Providing you understand the product and what it is capable of doing then it can give you security by providing an income each month after you have been out of work for a set period of time. The time you have to wait before making a claim varies from provider to provider, and can be anything between the 31st day and 90th day of being out of work continually. The cover would then carry on paying out a tax free income with which you can continue to repay your mortgage each month without worry for anywhere between 12 and 24 months of being out of work, dependent on the provider.
The main reasons why a policy might not be suitable for your needs are the exclusions and while these can differ between policies there are some which are common to the majority of mortgage payment protection insurance plans. If you are only working part time then it might not be suitable for your circumstances, if you are of retirement age, suffer an illness at the time of taking out the policy or only work part time then it probably isn’t the right product for your circumstances. Of course these are only the most common and it is essential that you read the small print of any policy you are considering taking out before signing on the dotted line.
It is the exclusions in a mortgage insurance policy and the lack of knowledge about them that has helped to give the product a bad name, although you should remember that it is the selling techniques and lack of mentioning the exclusions at the time of selling that’s the problem and not the product itself. When bought with understanding it can give you a safety net on which to fall and do the job its intended to do, but it has to be explained properly to the consumer.
In 2005 problems arose for the sector after it was found that there had been wide spread mis-selling of payment protection products and this led to the Financial Services Authority handing out fines to several major high street names, the most of which was a mortgage firm. The mis-selling ranged from adding cover on at the time of taking out the loan or mortgage, failing to tell the consumer how much the cover would cost them in total, failing to mention the exclusions which meant the consumer couldn’t decide if the product was suitable for their needs and charging high premiums for the cover.
The sector is currently under review by the Competition Commission and the results are expected in February 2009, meanwhile it is also still under the watchful eye of the Financial Services Authority and although some changes for the better have been seen, the recent review showed that many firms are still not up to scratch when it comes to selling techniques in mortgage insurance.
In March 2008 there is going to be the introduction of comparison table which will make choosing a policy much easier based on a series of questions the consumer will be able to make sure the products are suitable and they will know how much the cover will cost and what the exclusions are. Until then it is essential that you do all you can to understand what you are buying and if it will be suitable for your circumstances.
For now if you want the peace of mind that you would have the money each month to make sure you keep the roof over your head then stick with a standalone specialist provider for your mortgage insurance. Not only will you get all the vital information needed to make an informed decision over the suitability but you will also get the cheapest premiums available.