Insurance

Buying a house is one of the biggest investments you are likely to make in your life. Your mortgage lender is likely to insist that certain insurance policies, such as buildings insurance and life insurance are taken out before they lend you the money. This is to protect their investment. It should naturally follow that as the owner of the house you wish to insure your investment and the money you owe on your debts. However, the latest figures from the Council of Mortgage lenders show that only a fifth of all homeowners have mortgage payment protection insurance!

Predicting the future is impossible, but you can put contingency plans in place to reduce the impact of an unexpected event occurring. For example, it is difficult to predict if you will become unemployed or suffer a serious injury preventing you from working.

Mortgage payment protection insurance will enable you to meet any financial commitment during an enforced period of unemployment (usually up to one year). Payments are limited to this term to ensure that you have suitable enough motivation to return to work! It is important to note that for your claim to be successful, you cannot have any foreknowledge of your impending redundancy!

Many homebuyers are still caught in a time warp believing the State will help with any payments during a period of unemployment. Since October 1995 new mortgage borrowers have received no State help for the first nine months of unemployment or disability. Existing mortgage borrowers receive nothing for the first two months, 50% for the next four months and then full benefit for mortgages of up to £100,000 provided they qualify for Income Support. The Government themselves estimate that 70% of mortgage borrowers will not get Income Support due to their level of savings, their income, or because they have a working spouse or partner.

The message is clear; don't rely on the State and make your own provision for your debts on your investment.