There are no guarantees of job security
MANCHESTER EVENING NEWS - 12TH APRIL 2004
Unemployment figures are lowest level since the 1960’s – but in a rapidly changing world there are no guarantees of job security.
Each year around 20,000 people are made redundant. Statistics suggest , however, that only one in ten mortgage borrowers have taken the trouble to protect themselves against the consequences of losing their job.
It has been estimated that at least 80 per cent of breadwinners couldn’t afford to support their family, even for a short time if they lost their job.
Mortgage payment protection insurance exists to cover this eventuality. As well as unemployment it covers problems brought in by sickness and accidents and costs around £5 or £6 a month for every £100 worth of benefit a mortgage borrower needs to cover their repayments.
It’s possible to prune the costs, however. By shopping around and using an independent broker you should be able to achieve at least 40 per cent.
Alternatively, savings of 30-40 per cent should be achievable by limiting the policy to cover unemployment only, Kevin Carr of LifeSearch, an independent insurance specialist, said : “Unemployment cover typically pays out for a maximum of 12 months although there are policies available which will cover for two years.”
If you do lose your job, however, you won’t be able to look forward to an instant payout. Once a claim is made you’re likely to face a 30-day wait for payment. With some policies the delay can be three or even six months.
Self-employed people could experience difficulty protection because insurers would argue that it’s impossible for them to be made redundant.
“However, if you’re a director of your own company , or your own business you won’t be able to obtain a cover simply because you are destined to be in control of your own destiny,” explained Mr Carr.
“You should always thoroughly read the exclusions and terms of the policy”.
Although the majority of mortgage payment protection policies are taken out alongside the mortgage, cover can usually be arranged whenever a borrower decides to do so. Premiums tend not to vary according to a policyholder’s age and occupation.
However, many brokers say the majority of homeowners are still paying well over the odds for mortgage payment protection insurance.
Simon Burgess of Burgesses, a specialist broker, says mortgage lenders make millions of pounds from the mortgage payment protection insurance market and have become too greedy.
He estimates that lenders – banks and building societies alike – collectively make an annual profit of 1.5bn.
Manchester-based Quoteline Direct recently launched a mortgage payment protection insurance deal that costs borrowers £3.95 for every £100 – considerably less than the fee charged by lenders like Abbey (£6.04), RBS (£5.45) and NatWest (£5.12) for the same amount.
Mortgage lenders may well be offering some of the best value loans in living memory, but many seem intent on clawing money back with expensive mortgage protection premiums,” said Quoteline’s O’Gorman “When people take out their mortgage, they feel obliged to take the insurance offered by the lender.”
