Mortgage Protection Cover - What is it For?

The credit crunch and recession is causing many people to question their job security, which has a knock on effect with regards the rest of their lives. For example, for most people one of the biggest fears about losing their job is failing to keep up with mortgage repayments, amidst the fear of repossession of their home.

How Long Until Repossession

If you are unable to make repayments, the vast majority of mortgage lenders will usually offer up to 3 months ‘grace period’ before they begin court actions to start the repossession process.

The UK government is said to be pressuring mortgage lenders to seek out alternative options in the current climate, in an attempt help heal, or at least stop the bleeding of, the UK economy.

For those finding themselves out of work and unable to make the repayments, there are state benefits available, but unfortunately these will not usually be able to be applied for until 9 months of unemployment - considering the 3 month lenders often wait before instigating court proceedings, this can leave a serious shortfall, and mean a repossession seemingly inevitable.

Any Help to Avoid Repossessions?

There is a specific insurance policy that is offered by many authorised companies, that serves, in effect, to protect against inability to meet mortgage repayments due to unemployment or illness (policies do vary).

Such policies tend to be labelled ‘ Mortgage Protection Cover ‘. Most mortgage protection cover policies will only pay out for up to 12 months, however they are available for up to 24 months, but at an increased premium.

Some Mortgage Protection Cover policies may also cover general household bills, such as bills from utility and energy companies; however again, these tend to be at a much higher premium.

Do I HAVE to Buy Mortgage Cover From my Mortgage Lender?

Firstly, remember that although helpful, especially in the current financial climate, Mortgage Protect Cover is now a legal requirement. With that out of the way, lets answer the question at hand…

In a word, NO. You do not need to buy your Mortgage Protection Cover policy from your current mortgage provider; you can buy it from any authorised company. In fact, in November ‘08, the UK competition commission passed a ruling that such cover can no longer be sold along with a mortgage.

With the plethora of companies offering Mortgage protection policies, you would be wish to compare your options before signing any agreements, shopping around can help you both understand your options, and get the best deal for you.