A mortgage protection insurance policy provides someone with a monthly payment in the event of an accident, lasting sickness or period of unemployment. This is particularly important as the home is normally the most expensive purchase a family will make. Following any of the events defined in the contract, the policy will pay out a valuable cash sum each month for up to a year.
Advantages of Mortgage Protection Insurance
- Minimal state protection. The coverage offered by the state is now minimal, not to mention deferred for 9 months. A mortgage protection insurance policy provides vital assistance and may help to reach the allotted timeframe when state help does become available.
- Financial protection. In the event of an accident, poor health or involuntary unemployment, a mortgage protection plan will provide a sum of money for up to 12 months to help with paying the mortgage. In the worst case scenario, this could prevent a house being repossessed.
- Flexibility. It may be possible to defer the payout period in order to benefit from cheap mortgage protection coverage. This may be possible for people with sufficient savings and investments.
- Peace-of-mind. Most homeowners find that having coverage in place makes them feel more confident and assured about the future. This can help to prevent any unnecessary anxiety and stress.
Disadvantages of Mortgage Protection Insurance
- Limited coverage. Whilst some mortgage protection plans will provide financial help for longer, the majority will only offer assistance for a period of up to one year. Should it take longer to find employment or recover from an accident or sickness, this is not covered.
- Pre-existing medical conditions. An individual who has received treatment for or had a consultation with respect to a pre-existing medical condition will find that this issue is specifically excluded from the policy once underwritten by the actuary.
- Maximum payment. Mortgage payment protection coverage will not provide a sum of money that is equivalent to the insured's wages. There will normally be a defined limit (such as $2,500) or a maximum percentage of gross earnings limitation. This is there to provide the policyholder with sufficient incentive to return to work as soon as they are able to.
- Temporary employment. Should someone be in a temporary job or in their probationary, it will not be possible to cover the unemployment facet of mortgage payment protection.
- Mis-selling. A number of policies have been mis-sold to individuals who would never be able to claim. For example, selling a policy to someone who is over the age of 65. Whilst this is now strictly regulated, it has tarnished the image of the entire insurance industry.
Is a Mortgage Protection Plan Essential?
Mortgage protection cover could provide the difference between making monthly repayments and repossession for many homeowners. However, it is important to understand that coverage will only be provided for up to 12 months. Should unemployment, an injury or illness take longer than that to recover from, it is all down to personal savings and state benefits.
Asa Ghaffar - Asa has over 10 years of practical experience in loan approval, secured lending, bad credit repair, stock trading and debt management.
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