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. There is no help
for the first nine months of unemployment or disability for mortgages taken
since October 1995. Existing borrowers only qualify for benefit if they
qualify for Income Support.
You can buy 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, with mortgage protection cover. The
terms and conditions under which you can claim differ with every policy, so
you should always check them very carefully.
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 (1 year,
2 years etc) 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.
Most 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. For example with a 60-day
excess, and a claim for 65 days, 5 days are paid.
Alternatively some have
a waiting period after which time the claim is paid in full. 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.
Most providers will
cover your mortgage payment and a little extra for mortgage related bills,
such as pensions, 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 a payment protection (or ASU) policy in place.
ASU cover can be taken out at anytime during the term of a mortgage provided
you qualify under that particular provider's conditions.
