Despite the negative reputation that mortgage insurance has gotten over the years, it can still be a valuable product to have as a backup plan in case you are laid off due to an accident or illness, or if your job is lost through redundancy.
If you are able to understand the product and its capabilities, it can provide you with security by providing you an income every month after you have been away from work for a certain period. There are different times that you need to wait before filing a claim. It can vary from one provider to another and could be anywhere between the 31st and 90th days of being out of work continuously. The provider will determine if the coverage would continue to pay a tax-free income that you can use to repay your mortgage monthly.
Exclusions are one of the main reasons why a policy may not suit your needs. While exclusions can vary between policies, there are many that are common to most mortgage payment protection insurance plans. It might not suit your needs if you work only part-time. If you reach retirement age or are ill at the time of the policy, it may not be the right product for you. These are not the only common situations. Before signing the contract, it is important to read all details of any policy that you might be considering.
The product’s negative reputation has been caused by the exclusions and lack of knowledge. However, it is not the product that is the problem. It is the sales techniques and inability to mention the exclusions during the sale that are the problem. If you understand the product, it can provide a safety net and allow you to perform the job it was intended to. However, it must be clearly explained to the customer.
After widespread mis-selling of payment security products, problems emerged for the sector in 2005. The Financial Services Authority handed out fines to several high-street names, most notably a mortgage company. Misselling included adding coverage on to a loan or mortgage at the time, failing to inform the consumer how much total cover would cost, failing to mention exclusions, which meant that the consumer could not decide if the product was right for them, and charging high premiums.
The Competition Commission is currently reviewing the sector and its results are expected in February 2009. Meanwhile, it is still under the watchful eyes of the Financial Services Authority. Although some improvements have been made, recent reviews revealed that many companies are still not up-to-standard when it comes selling mortgage insurance.
The introduction of a comparison table will help consumers choose the right policy. It will allow them to answer a series questions to ensure that the products they are considering are appropriate. They will also be able to determine the cost of the coverage and the exclusions. It is important to fully understand the product you are purchasing and whether it is suitable for you.
If you are looking for the assurance that you will have enough money each month to keep your roof over your head, then a specialist standalone provider is the best choice. You will not only get all the information you need to make an informed decision about whether you are a good candidate, but you will also receive the lowest premiums.
