Mortgage Protection Insurance

Unemployment Insure for your Mortgage

Mortgage protection insurance comes in two forms. Firstly, the basic type which is in effect a simple life insurance or endowment policy that is calculated to settle any outstanding house purchase loan if you or the other named person, in the case of a joint loan dies.

Certain types of endowment policies also carry cash benefits that on maturity should provide a sufficient 'with profits' cash benefit to allow any outstanding residue of the mortgage to be paid off in full. This type of insurance policy is essential, as it will ensure that the surviving partner and any dependants will not suddenly become forced from the family home in the event of the death of one of the main providers.

This type of mortgage protection policy should not however be confused with a 'Mortgage Payment Protection Policy.' An insurance policy of this type is also referred to as an ASU or 'Accident, Sickness and Unemployment Policy' and is designed to enable a mortgage holder to maintain the regular repayments for an agreed period of time in the event of that person becoming unable to earn a wage due to disability, redundancy or dismissal from their job.

mortgage protection insurance quote

It is worth mentioning at this point that neither type of mortgage protection policy is intended to take the place of income protection insurance or long term disability insurance, both of which provide for a more all encompassing level of cover. A good policy should provide cover for all interest and regular payments related to a property mortgage and should commence after the first month of incapacity or unemployment. In general, the payments are made directly to the lender. It must be understood that payments from such policies generally have a time limit. Most mortgage payment insurances will only provide cover for around twelve months, after which time it is assumed that the policy holder will have found alternative means of making the necessary payments.

Neither type of policy is compulsory, although some lenders will stipulate them as a one of the conditions of a loan to some borrowers. Although the policies can be expensive they are strongly recommended particularly to the self-employed and to part time and contract workers who may not benefit in the same way as salaried employees in companies that have their own 'in house' salary protection schemes.

Both Mortgage Protection Policies and Payment Protection Policies are commonly available from many insurance providers, although the benefits differ enormously. Like all insurance, the cost of the premiums may seem an extra financial burden, but before you dismiss them as an expense that you don't need, think of your home and how you will keep up the monthly mortgage payments if your source of income dries up!

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