Insurance rip-off
EVENING STANDARD - 24TH JULY 2002
Protecting your mortgage repayments is essential. It is outraged at the lenders who take advantage by overcharging.
Last month Standard Life wrote to its homebuyers with mortgage payment protection insurance policies stating that, unless they chose new cover before 9th July, they would no longer be insured. “The company underwriting your cover will change,” says the letter. “Importantly, because your existing cover will be terminated, you must act now to transfer to out new provider.” Homebuyers were given 30 days to respond or their cover would be cancelled.
What Standard Life Bank doesn’t say is that many customers will end up paying more with the new underwriter, Pinnacle, when they could mostly buy mortgage payment protection insurance cover at a better rate elsewhere.
Mortgage payment protection insurance cover is important. It provides a monthly cash sum to cover your mortgage repayments and other household overheads if you are unable to pay because of unemployment or sickness. Since 1995 you have to be out of work or off sick for 39 weeks before social security mortgage interest payments kick in, and 70 per cent of homebuyers are not eligible because they have too much in savings.
Thirty days barely gives homebuyers time to shop around to see if they can get a better quote elsewhere. Many who bought the cover as an “add-on” wouldn’t know where to start looking. However, a Standard Life Banks spokesperson says: “The notice period was in line with industry guidelines.”
The letter to the mortgage payment protection insurance policyholders tries to reassure clients: “The new mortgage payment protection insurance product is designed to offer comprehensive cover at highly competitive rates…our most popular option would cost you just £4.70 a month per £100 of cover, compared to the industry average of £5.50” yet the same cover is available elsewhere through brokers for well under £4 a month per £100 of monthly repayments.
Further, the Standard Life options are for 60 or 30 days deferment before benefits are paid.
“There is no excuse for any insurer not to offer back-to-day-one cover,” says Simon Burgess of Burgesses, one of the largest sellers of mortgage payment protection insurance policies. “All out policies offer this.”
Burgess adds: “Our policies pay as from the first day of unemployment, once you have been out of work for the period of the deferment.” In other words payments are backdated. “We can offer back-to-day-one cover for sickness and unemployment for £3.95 a month.”
Standard Life Bank customers pay premiums monthly, usually alongside the mortgage payment. There is nothing to stop them getting a better mortgage payment protection insurance quote elsewhere and cancelling the new cover with Pinnacle/Standard Life before the first premium becomes due.
