When it comes time for you to buy a house, or any type of property, there are countless things that you have to be aware of in advance. Putting together savings to go towards a deposit as a down payment on the property is one thing, finding a financial broker willing to give you credit and a mortgage for that property is another thing. It can be difficult at times to put together the right package that suits your personal financial situation and to make sure that you end up with your dream house. One area that is often overlooked during these initial stages of finding a mortgage is mortgage protection insurance. It is very important, so what is it and how does it help you?
Mortgage protection insurance provides a new homeowner with a safety net. It gives you that peace of mind that in the worst-case scenario where you can no longer afford to cover the monthly repayments on your mortgage, that it is covered by the insurance you have been paying into. This type of coverage helps to ward against defaulting on your mortgage and the long-term peril of your home being repossessed due to missed mortgage repayments.
What is mortgage protection insurance exactly?
If you have been out of work for a specific period of time listed in your mortgage protection insurance (this is usually set at 30 to 60 days), your insurance will then begin to pay you a set amount each month designed to cover your mortgage repayments and your outgoing bills, if specified. In the vast majority of cases you’ll receive the payments for between 12 months and 2 years. It is a different situation to mortgage PPI, as the payment is paid directly to you rather than the lender.
Are there different types of mortgage protection insurance?
There are three types of mortgage protection insurance that you can expect to find when searching for a safety net to your mortgage. Each one covers a specific scenario. The first is unemployment cover, paying out if you are made redundant or you are out of work for a set period of time. The second is accident and sickness mortgage protection cover. This is where you are unable to work due to a serious injury you have suffered or if you have become ill. The third type of insurance is a combined mortgage protection insurance, covering both of the previous types of cover. If you are self-employed, it is always worth looking for cover that is specific to freelance work.
Do I really need mortgage protection insurance?
It is not a given that you have to take out mortgage protection insurance when buying a home. It is not a compulsory part of any mortgage agreement, but it is something that you should take very seriously. You never know what is around the corner, and as with taking out any kind of credit, whether a payday loan, a personal loan or a mortgage, you need to know that you have the means to pay back under the agreed terms. Mortgage protection insurance is a safety net cover in the worst-case, ensuring you have a place to live, even if you can’t work for reasons that are not your fault.