Unemployment mortgage protection insurance could help consumers that lose their jobs to meet their mortgage payments. How does this kind of policy work and it is worth taking out?
What is Unemployment Mortgage Protection?
This kind of insurance policy is designed to give financial help in the event that a policyholder loses their job. The aim here is to help them pay their mortgage for a set period of time until they get back on their feet again.
How Does Unemployment Mortgage Protection Work?
In most cases a policy is set up to pay out a specific amount of money for a set period of time. So, for example, an individual may opt to get a certain amount of cover for 12 months. This may not necessarily exactly meet the time that the policyholder is unemployed or their exact mortgage payment.
Most UK policies will have a "wait" time of a few weeks or months during which time a claim will not be valid. Many will also then impose conditions on when payments start. This may mean a wait of a certain number of days after a claim before payments are made. If a policy has a "back to day one" clause, however, then the policyholder will be paid all that they are owed on a backdated basis.
Is Unemployment Mortgage Protection Worth It?
It is important to look at the terms and conditions of any unemployment mortgage protection policy before taking one out. Whilst these policies can be useful for some; they may not suit others as well. Some may have alternative types of protection in place such as company benefits and this kind of protection may, therefore not be needed.
Others may find that their circumstances may not make this the best solution. For example, mortgage payments may be a lot higher than allowed payment sums and those with pre-existing medical conditions or that have not been employed for a specific time may not qualify to make a claim.
Issues to consider include:
- What kind of employment is covered or excluded by the insurance?
- How long must the policyholder have been employed before they qualify to take out a policy?
- Which reasons for unemployment are covered and not covered?
- How long will a policy pay out for and how much will payments be?
- Are there any exclusions that could make it difficult for an individual to make a claim?
It is also worth remembering that unemployment protection is just one of the products that can be used to meet mortgage costs. It may, therefore, also be worth considering other options at the same time.
Which Other Mortgage Payment Protection Policies are Worth Considering?
Some may only need or want to set up mortgage payment protection to cover them in the event of unemployment. Others may have broader needs and may need policies that also deal with other income loss situations such as accident and sickness.
It is possible to take out full policies (often referred to as ASU insurance) that cover accident, sickness and unemployment in one package. Alternatively, those that have unemployment needs covered elsewhere could also consider a policy to protect them in cases of serious accidents or illnesses.
Those interested in learning more about mortgage payment protection in general may find the following articles useful:
- A Guide to Mortgage Payment Protection Insurance
- Do Homeowners Need Mortgage Payment Protection?
- Is Mortgage Payment Protection a Waste of Money?
- Alternatives to Mortgage Payment Insurance
- How to Compare Mortgage Payment Protection
Carol Finch - Carol Finch is the Topic Editor for Retirement Planning, Budgeting, E-Commerce & Technical/Business Writing on Suite101.
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