Job in peril? Don’t lose the home, too
THE MIRROR - 16TH JUNE 2002
It’s estimated that half of Britain’s 11 million homebuyers could not meet their mortgage if they fell ill or lost their jobs. And the risk of that happening has never been so high. Massive restructuring taking place across every industry means that no job, from the boardroom to the shop floor, is safe.
Barclays, Marks & Spencer, Mothercare, Procter & Gamble, Sainsbury and insurance giant AXA have all recently announced job cuts, and the British Steel Euro-merger is also expected to kill jobs.
The risk of serious injury or illness putting people out of work is just as great, according to the Association of British Insurers (ABI).
Every year one in five people will not work for three months or more due to serious illness. If you lose you job, your chance of getting help from the state to meet your mortgage are slim.
Since October 1995 new mortgage borrowers receive no state help for the first nine months of unemployment.
Others receive nothing for the first two months and only 50 per cent for the next four months.
Seven in ten homeowners would still not qualify for help because they have savings or a working spouse or partner, even if their income is insufficient to meet the mortgage.
One solution is to take out sickness and redundancy insurance, though fewer than one in three has done so.
That’s because until now so many policies were expensive, slow to pay out and often excluded those most at risk, such as the self-employed and people on contract work. Some claimants who became ill or injured were subjected to repeated tests by independent medical experts because insurers refused to trust family GPs.
Under pressure from the Government, an industry working party was set up jointly by the ABI and the Council of Mortgage Lenders, which from 1st July has a new minimum standard for future policies, which must:
• Pay out after no more than 60 days away form work.
• Meet the mortgage for at least a year after that.
• Have fewer automatic exclusions for medical conditions such as pregnancy complications and backache
• Cover people who were previously excluded, such has the self-employed and contract workers.
Case study
Bill Murphy, a 33-year-old bank computer programmer, had his contract terminated just six months after he borrowed £90,000 to buy a flat in East London.
Fortunately for Bill he had taken out a redundancy insurance policy with Burgesses along with the mortgage. the policy, which cost £30 a month, is paying him £800 a month – enough to meet his mortgage and his living expenses.
“It’s very unpleasant,” says Bill. “You would have thought that working in computers it would be easy to get another job. But I specialised in programs for banks which are no longer being used. I’m now having to retrain to get another job.”
Money advice
Don’t take on a mortgage unless you can afford it and your job is secure. You should have a nest egg sufficient to meet the mortgage if you were laid up at least until you qualify for state help.
Otherwise you need a sickness and redundancy policy which offers adequate cover. Talk to your lender or broker or an insurance specialist such as Burgesses.
