How Does Mortgage Protection Work?

beachbeth

I have been looking at quotes for mortgage protection just to cover my husband as I don't work. I found a quote that will cover us for between £6 and £8 per month depending on what cover we choose. However it says in the details that the "Day Benefit is Paid From" is 91st day from date of claim. Does this mean that you get nothing for the first few months? I don't understand this. Is this usual? Sorry if Im being thick here!

dunstonh

Accident,sickness and unemployment cover (ASU) has an initial deferment period that ranges from 30-90 days with most providers. Some give the option to roll back to day 1. Some don't. With 90 days, you would have to be off work for 90 days before you can start being paid. If you have a roll back option, you would have to be off work for 90 days to qualify but payment would be backdated to day one instead of from day 91.

You should also look at permanent health insurance (PHI) as that is proper income protection. Although it has an initial deferment period, it is underwritten to your circumstances, cannot be cancelled by the insurance company and will continue to pay out for the full length of sickness or selected finish age (which is typically retirement age), which ever comes first.

A combination of ASU and PHI is usually the best way unless you are self employed, in which case, PHI only is often the best option.

beachbeth

dunstonh wrote: »

You should also look at permanent health insurance (PHI) as that is proper income protection.

Which companies provide this?

silverfoxuk

These two will give you an idea of costs as you can get quick quotes online:

http://www.cavendishonline.co.uk/

http://www.lifesearch.co.uk/

Arranging PHI isn't simple though as there are quite a few factors to take into account when arranging the policy not least are the premiums guaranteed or reviewable?, are the benefits index linked etc?

Also do you have children? You may need to think about setting it up to pay out for a mum (yourself?) whose value to the household in childcare provision far outweighs any part-time or no income that would be lost due to illness.

Lifesearch & Cavendish will provide you with advice on protection products over the phone. However, a face to face visit to a local IFA could be a more productive exercise for you, and perhaps at a similar cost (in commission) that lifesearch charge. If you are VERY confident you know what you are doing, then Cavendish could work out very cheap as they will arrange PHI for a fixed fee of £35, no commission and the premiums will be cheaper as a result. However, this is execution only however with no advice, so no comeback if you buy an unsuitable policy that doesn't meet your needs.

Good luck!