Having a financial plan to help protect your home in the event that you are too ill to work. It’s a sensible precaution, not just to protect your biggest investment, but to keep a roof over the heads of your loved ones.
Taking out a mortgage is the biggest financial commitment many of us will ever make. We save and go without to get our first deposit together, and then we pay over a large proportion of our income for the next 25, 30 or even 40 years.
Many of us forget – or prefer not to think about – what would happen if something went wrong, and suddenly we could not make those your monthly payments.
No protection for your home and family
Surprisingly, half of the people with a mortgage in the UK have no cover in place if they died. Leaving themselves and their families financially exposed if the unforeseen were to happen.
But even if you have life cover in place, you may still be leaving yourself and your family at risk. If you were to become unable to work as a result of illness or accident, you would still be faced with the bills – and your monthly mortgage payments.
Scottish Widows’ latest research also shows that only a fifth of the UK’s mortgage holders have a critical illness policy, leaving many more at risk of losing their home or financial hardship if they were to become seriously ill.
That is not the only risk you are probably running. No-one knows what is around the corner for the economy or their job. As we saw in the last financial crisis, even large institutions can fail. Most of us need to consider the potential risk of unemployment.
Unable to work
A third admit that if they or their partner were unable to work for six months or longer due to ill health or personal injury, they’d be unable to live on a single income. And more than 43% of those who couldn’t cope with a single wage say they would resort to savings in order to survive.
Many say their savings would last for no more than a couple of months, and an astonishing 15% don’t even know how much they have, meaning they could be relying on backup which doesn’t actually exist.
Can’t pay the Mortgage
Household bills would be bad enough, but the real problem would be the monthly mortgage payments. State benefits exist. However changes to Support for Mortgage Interest, the only safety net for many families, mean that they now have to wait 39 weeks before receiving this benefit. For many this could simply be too late.
Arranging the protection you need
Fortunately, there are solutions available. Mortgage payment protection insurance can cover your mortgage payments if you’re unable to work due to accident, sickness or unemployment. The cover pays you a set amount each month, usually for a period of 12 or 24 months. Some policies let you also cover other monthly bills as well as your mortgage.
There are limits and conditions. Most providers let you have a maximum benefit of between £1,500 and £3,000. In addition, some mortgage protection policies don’t let you take the policy with you if you switch mortgage.
You’ll also have to wait once you’ve put in a claim before the policy benefit starts to be paid out. Providers call this the ‘excess period’ or ‘deferral period’. It can range from 30 days to 180 days. In general, the longer the waiting period you choose, the cheaper the policy.
Mortgage payment protection insurance is limited in what it can offer, and you may prefer to consider an income protection policy, which can offer a much broader level of cover.
To discuss the cover that is best for your needs, or simply to find out how much it costs, give us a call today.
Your home may be at risk if you do not keep up with the repayments for a loan or mortgage secured on your property.