Mortgage Protection Premiums
Most mortgage payment protection insurance policy holders pay the same flat rate regardless of factors such as age, smoking habits and medical history - although medical conditions which you had before the cover started (so called “pre-existing conditions“) are excluded.
However, many of the standalone providers are now “age-banding” their premiums meaning that the younger you are the cheaper it is. In addition, there is now the option to choose either a 3 or 6 month benefit period, instead of the standard 12, offering you the chance to greatly reduce your premiums for cover you may never use.
This might be relevant if you wanted Unemployment Only cover and were confident of finding work quickly.
Premiums can cost from as little as 60p a month per £100 of monthly benefit with good providers like Antinsurance.
However Banks and building societies can charge a great deal more and quite often their cover is no better, and sometimes less flexible, than that offered by standalone providers.
Policies offered and attached to your mortgage or loan could have a “deferred period”, this is the length of time you have to wait until you can make a claim. This can range from 3 to 9 months which may not be an issue if you have savings, but could be very difficult if you have not. A specialist standalone provider can offer Back to Day 1 cover that allows you to make a claim on the 31st day of consecutive loss of income that is then backdated to the first day.
Nevertheless, even the best mortgage payment protection insurance policies are not necessarily suitable for everyone. The exclusion for pre-existing medical conditions can, for example, make them of questionable value for those who have had illnesses that are likely to recur and, if you have sufficient savings to tide you through a spell of unemployment or accident and sickness you may not require full 12 months cover, in this instance you could look at the lesser 3 or 6 months benefit periods in order to reduce your premiums.
The self-employed should also be aware of the special exclusions that relate to their position before they take out mortgage payment protection insurance, because it only pays out for loss of income if you have submitted final accounts and your company is closed, you cannot make a claim if you temporarily go through a “lean patch”.