The Mortgage Option

A big change for the better will be seen in March this year when the Financial Services Authority introduces comparison tables for payment protection products. Payment protection consists of three policies: mortgage protection insurance, loan payment insurance and income protection. Currently all three policies are hard to understand and, depending on where you buy the cover, very little information can be given.

The comparison tables will ask the questions relating to their circumstances and help the consumer choose the most suitable type of cover, if any. They will also make the individual aware of the exclusions and terms and conditions, including how much a policy will cost. It is hoped that this will open up the payment protection sector and make it more transparent when it comes to buying. Consumers need to understand a policy and what it is and is not capable of doing, to ensure they choose the right cover.

Some of the most frequent policy exclusions to be found include only working on a part-time basis, being self-employed or retired, or suffering an illness that is ongoing at the time of applying. Providers can slip other exclusions in and the terms and conditions of each provider do differ. It is for this reason you have to compare not only the premiums but also the key facts. You have to delve deep into a policy before buying. For example, although a pre-existing medical condition would mean a policy is not suitable, if the condition has not occurred within the past two years you might be able to claim.

A lack of information is what leads to confusion and individuals buying cover that they cannot hope to claim against. The majority of polices that have been mis-sold have been done so when the consumer has taken on a loan or mortgage and the cover at the time of borrowing. While this might seem to be the best option for taking out mortgage insurance it can be the dearest. High street lenders are known to charge way over the odds for the premiums. Simply by shopping online with a specialist provider the consumer can get a policy up to 40% cheaper than the high street quotes.

Mortgage protection insurance would give the policy holder a tax-free income if they found themselves unable to work. A policy would give protection against being made redundant, suffering from an illness or having an accident. Depending on the terms of the cover a policy could begin to pay out from day 31 but it can be as late as day 90. Once the cover has started to provide the holder with benefit it would then continue for between 12 to 24 months. This income would provide great relief and peace of mind by allowing the individual to keep up with their mortgage repayments and not get into arrears. If the homeowner could not afford to keep up the repayments they would risk losing the roof over their head to repossession. When taken out with your circumstances in mind, mortgage cover can stop this worry.