Job security?
NOTTINGHAM EVENING POST - 10TH NOVEMBER 2002
A range of policies exist to help us with mortgages and other payments if we find ourselves out of work.
Daily reports of redundancies and threat of recession are causing many people to worry how they will pay their bills if they lose their jobs. Financial help from the Government after redundancy is limited, but many don’t realise this until it is too late. Mortgage cover, for example is means-tested and anyone with more than £8,000 in savings will receive nothing.
Those who qualify for Government help will find it covers only mortgage interest. Where mortgages were taken out after October 1995 there is no help for the first nine months of unemployment or disability. Accident, sickness and unemployment insurance and mortgage payment protection insurance don’t come cheap, but could be a small price to pay if the jobs axe falls.
These policies pay out a percentage of monthly mortgage payments, typically for up to 12 months, if you are unable to work. But wide variations make expert guidance important.
“The type of cover we recommend always depends on an individual’s requirements and circumstances – that’s why it is important to get advice before buying a policy,” says Jonathan Fennell, independent financial adviser at Timothy James and Partners in London. “Prices vary greatly depending on occupation, sex, age and state of health.”
The cost of both types of policy is between £4.50 and £5.50 per £100 of cover per month. You can choose whether payments would start one, three or even six months after losing your job and you can choose the proportion of your monthly payments to be covered – typically up to 75%.
Mike Stannard, director at White Horse Financial Services in Swindon, Wilts, says: “Accident, sickness and unemployment might not be necessary for people who are likely to find new work within four to six weeks because if take 30 days for most policies to kick in.”
Pinnacle Insurance has income cover up to £1,000 a month for 12 months. The policies pay your full monthly mortgage bill. For a 30-year old with a £500-a-month bill, full accident, sickness and unemployment cover starts at £10.10 a month.
Burgesses income protection policy has a 30-day waiting period but the maximum cover is £2,500 a month or 75% of gross salary – whichever is the lower – for up to two years. This policy costs from £4.50 per £100 of cover for unemployment and disability insurance.
Burgesses also offers mortgage payment protection insurance from £4.25 per £100 of cover with a 30-day excess period. It covers 65% of gross income up to a limit of £1,500.
Bear in mind that individual policies pay out tax free so it’s like your net income.
Mike Stannard says people shouldn’t have to have a medical for accident, sickness and unemployment cover. But adds: “It is usual to have to declare any medical conditions and whether or not you’re a smoker, and this could affect the pricing of a policy.”
