Insurance to Protect Your Mortgage and Income Protection Insurances
By: Sheila Challiner
Submitted: 2009-02-22 14:31:44 | Word Count: 531
There are various insurances to protect your income and you need to know what cover your employment would give you so that you can protect against any shortfall should the need arise. Below we explain what plans there are at what they do.
Mortgage Payment Protection insurance will pay your mortgage if you are made redundant, fall ill or are injured, for one year, sometimes two. Of the 11.7 million current mortgages just 2.3 million are protected by this insurance and seven out of ten of those cost more then 5 pounds per month per 100 pounds of cover and are sold by the lender – if bought independently than can be more competitively priced. A spokesman from mortgage brokers London & Country said, This is often regarded as expensive cover and the take up is low.
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Payment Protection Insurance (PPI)
Payment Protection insurance is normally specific to a credit agreement, credit card or personal loan mostly with benefits going straight to who is providing the service and therefore, payments should not have any affect on any social security benefits. You are protected if you are made redundant, are injured or too ill to work. This cover usually costs approximately 18 pounds per month for every 100 pounds of monthly cover. For a monthly repayment of 300 pounds the cost of the premium is 54 pounds a month.
If you feel you need this security then it is worth having but you do not have to take it from the lender as it will be expensive, even adding thousands onto your loan. Companies have been mis selling PPI but Alliance and Leicester have been caught out and fined 7 million for doing it. If you want PPI an independent provider will be more competitive; try britishinsurance.com or paymentcare.co.uk
Short Term Income Protection
Short Term Income Protection is different to the above two. It is paid directly to you and is linked to your income. This means it covers everything, from major outgoings (mortgage) to the gas bill but, it could affect any social security entitlement. Again, it pays out if you are made redundant, you are injured or ill and unable to work and the cover you get is calculated on 75 per cent of your net income or 40 – 60 per cent of your gross income. Some providers cap their monthly pay out at 1,000 pounds but others will pay up to 2,500 per month.
Unemployment Cover
Unemployment cover will pay between 40 and 60 per cent of a gross income in the case of redundancy and can be available as a free standing policy. Social security payments can be affected again as it would be paid directly to the recipient. If your employer offers good benefits if you are injured or sick it may be worth having this stand alone policy but it can cost more than a policy that covers for illness and injury too.
Full Income Protection
Full Income Protection can give you a policy that will include unemployment and the cover for injury or sickness is also more comprehensive and generally pays out for longer too. Nevertheless, the unemployment cover is as restricted as it is with any other policy and will only pay out for a maximum of 2 years.
