Insuring Your Mortgage Repayments
Some people like to make their lives as safe as possible. When borrowing large amounts of money to provide a roof over your head it seems sensible to insure those payments against loss of earnings due to ill health, redundancy, or accident… Or does it?
There’s a risk in crossing the road
Insuring your monthly mortgage payments will be suitable for some people but not for others. Often for young first time buyers it appears to be just another expense that their already over-stretched budgets simply can’t afford. But equally, can they afford not to have the cover?
Although there is a risk in everything in life, (even sleeping carries its own risks), there are some things that are statistically more likely to happen than others. When you’re up against hard facts, then you really have to have quite a good reason not doing something.
The facts are that these days no job is secure. Redundancy is probably a greater threat to the mortgage than ill-health or accident, but that will depend on the lifestyle and individual circumstances of each person.
If you are confident that you could walk right out of one job and straight into another then perhaps payment protection is not for you.
Buy from your mortgage provider?
We cannot by law give any actual advice on this website as we are not regulated by the FSA. However, we can point out a few things about products and let you make up your own minds and we always, always, always recommend that you shop around and do your own thorough research before making any decisions or committing any money to any product.
So, let us ask you, would you buy payment protection from the company that lends you the mortgage? Do you buy insurance at Dixons when you buy a new electronic gismo? Do you buy your house buildings insurance from your mortgage lender? Do you take out a personal loan from your High Street Bank? If the answer to all of these is yes, then you may well be happy buying payment protection from your mortgage company too. But it pays to shop around.
If you are the sort of person that would like their monthly mortgage payments insured then it might be worth investigating an Income Protection Plan which would provide similar cover as Payment Protection provides but for your entire monthly expenditure, not just your mortgage bills. It’s easy to forget that if you are incapacitated for some reason that all the bills will still be there: the money going out the door each month won’t stop just because you can’t earn it.
Either of these types of plans have short delay periods before they kick in which are usually about three months. So, again if you are the cautious type then ideally you should have about three months income put away somewhere in case of emergencies. These plans will usually stay in force for at least a year, if not longer. Some Income Protection Plans will continue until you are fit and well or secure another job.
The fate of the self-employed
Whether Payment Protection is relevant for the self employed is something that you will have to consider carefully. As a self employed person you are supposedly more in control of your own destiny and you are not going to get made redundant. You are, however, susceptible to accidents or illness, just like other mortals.
Over to you
Like all these decisions, whatever your personal situation the final choice will be yours. Paying for insurance on your mortgage will depend not only on your view of life and your job security but also on the economy at the time.