Mortgage Protection

Accident Sickness and Unemployment Insurance

You may think that you will be able to rely on your savings or State benefits to pay the mortgage if you are unable to work - but research has revealed that for the majority of borrowers both these routes would be inadequate to cover them.

Becoming unemployed can cause many problems, not least the fact that there simply may not be any money to pay the bills. Most people will agree that their home is their most important material possession, yet if mortgage payments cannot be made, the security of a home can be taken away.

You cannot rely on state help to cover your mortgage payments if you cannot work, and State benefits for people in this situation are limited, and means-tested, so if you have savings you would be expected to use them first.

You can buy mortgage protection cover to protect your mortgage payments if you have an accident or become ill and cannot work, if you become unemployed, or to provide full cover for accidents, sickness and unemployment. The terms and conditions under which you can claim differ with every policy, but the Government has forced a review in the market and policies must now meet or exceed certain minimum standards.

Many people never consider mortgage protection insurance when taking out their home loan, but it is vital if you wish to protect the security of your home in unfortunate circumstances.

Mortgage Protection Insurance otherwise known as ASU or Accident Sickness & Unemployment insurance is not compulsory, although it can be a condition of some loans. But anyone with a mortgage should consider taking it out. For people who might have stretched themselves financially with their mortgage it is probably even more important to be covered in the event of unforeseen unemployment. Good policies will cover any bills related to your mortgage - including interest and repayments.

A good Mortgage Payment Protection Insurance policy will start to pay one month after you are out of work (either through illness or redundancy).

Typically policies pay out for a benefit period of 12 months. It is expected that within that period people will have found other employment or recovered from illness.

The Benefit period is the length of time you can claim monthly payments for, and these vary for each policy. You can select the time period you want to be covered for (1 year, over 1 year) but the longer you want the cover for, the more expensive the premiums will be.

There is always an Initial Exclusion period at the start of the contract, during which time no claim can be made. This normally applies to unemployment only and is 30, 60 days or longer.

Some policies also have an excess period, for each & every claim. An amount of days 30, 60 or more which are excluded from the claims payment, but a good number of policies now offer a back to day 1 benefit. With a 30 day waiting period, on the 31st day of unemployment or disability the claim is back dated to day 1 & paid in full. It is usual in most cases that payments are made directly to your mortgage lender, although in some cases payments are made to the customer.

Most providers of mortgage protection insurance will cover your mortgage payment and a little extra for mortgage related bills, such as, insurances etc. They usually offer an extra 5, 10 or even 25% but may have conditions on what this money can be used for.

Only a quarter of homeowners are thought to have Mortgage Protection Insurance policy (or ASU policy) in place. Mortgage Protection Insurance otherwise known as ASU cover can be taken out at anytime during the term of a mortgage provided you qualify under that particular provider's conditions.