It is believed that only about
one in every four people has a mortgage insurance
protection plan to cover their mortgage payments in
the event of a short-term job loss. This is in spite
of the fact that the State does not offer financial
assistance to the unemployed for nine months,
generally. Mortgage cover is a way for many to
protect their homes by paying small monthly premiums
to cover job losses due to involuntary redundancy,
illness, or accident.
Part of the reason that a small
percentage of home owners currently have protection
is that many are uneducated on the benefits of the
insurance, or are unfamiliar of how it works.
Amazingly, even though a small percentage of home
owners are covered, research also shows those that
do have a plan are often not even aware of it, or do
not understand its benefits.
A big reason for the lack of
knowledge in the mortgage insurance industry is that
for years, much of the plans sold were provided by
large institutions, such as high street banks and
lenders. Keeping a limit on the amount of
information customers had about the products was a
part of the strategy for several of these companies.
Many banks either hid the coverage in the fine print
of disclosures and sold it in combination with
mortgages, personal loans, or credit cards, or used
manipulation or pressure tactics.
As consumer advocate groups have
been putting more and more pressure on the Financial
Services Authority (FSA) and Office of Fair Trading
(OFT) to produce more consumer friendly regulations,
consumers have become more knowledgeable.
Many consumer groups are
attempting to educate consumers on their options.
They want them to learn before buying loan products,
what the common selling tactics are. It is also
important for consumers to read the details and fine
print of financial services or loan products before
agreeing to terms or signing contracts.
Brokers and insurance specialists
have a better reputation than the larger sellers.
They generally offer premiums that are 40 to 80 per
cent lower than those offered by most banks and
lenders. This cost savings can make a huge impact on
the value proposition for customers exploring their
coverage options. Brokers are usually helpful at
lining up customers with the best benefits
available, and fewest coverage exclusions, based on
the customers indicated needs and requests.
Mortgage insurance plans are part
of the umbrella of income payment protection
products. These are short-term insurance plans that
typically offer monthly payments ranging from 12 to
24 months. Longer-term plans are usually covered
under other product categories, including income
protection products. Payment amounts vary depending
on the customer's needs, budget, and allowable
cover. Coverage limits are based on monthly mortgage
amounts and normal incomes. Most mortgage payment
protections offer full mortgage coverage with some
extra money for additional expenses. Some plans are
based on a percentage of monthly income. Obviously,
the more coverage required by the customer, the
higher the premium cost.
Be MoneyWise
