Mortgage Insurance - Protection against the unforeseen

Our Guide to Mortgage Insurance, home insurances, and other essential insurances is a great starting point to learn more about the different types of insurance available for protecting your mortgage payments, as well as protecting your home and it's contents should the unforeseen and even the unthinkable happen. We'll also take a look at how Shire Direct can help with these insurance types as well as your mortgage!

Table of Contents:

Why do I need Insurance?

An excellent question!

And the answer... well if you can guarantee that during the next 25-years or so, you or your partner:

will not die
will not become unemployed
will not have an accident that could prevent either of you from working for a period of time
will not suffer an illness that may incapacitate you from working for a period of time
will not be subject to burglary or theft
will not suffer any accidental damage to your home or its contents
will not lose any item of value away from your home, such as cash, jewellery, photographic equipment etc.
will not incur any damage to your buildings or contents as a result of fire, storm or flood
will not contract a critical illness, such as cancer, MS, or suffer a heart attack

If you can guarantee that neither you nor your partner will suffer any of the above, then the answer is that you wouldn't need insurance!

Fact of the matter is, none of us can predict what's going to happen to us! And so that's why it's best to have a wide range of insurance products to ensure that you are protected in case the unexpected happens! By doing so, you will have peace of mind that in the event calamity strikes, you will be safe in the knowledge that these emergencies will be take care of.

Assessing your Insurance Protection needs

You may find it useful to know that as well as being able to provide you with suitable mortgage advice, Shire Direct Mortgage Advisors are also professionally qualified to assess your insurance requirements by checking your present cover, your circumstances and requirements.

Our Advisors will then carefully analyse your Insurance Demands and Needs and prepare a statement to show this information, give you advice and their personal recommendation on the following protection areas:

So you can see that it's important when you take out a mortgage to remember that there are a number of protection areas that will need to be addressed, and therefore you should always ensure you have accounted for these insurance premiums when calculating your mortgage affordability.

Let's take a closer look at the insurance protection that you're likely to need...

Home Insurances (Buildings and Contents cover)

The only compulsory insurance is buildings insurance. Most lenders will allow borrowers to arrange their own buildings insurance, although some may levy a fee if you don't use their insurance. Buildings Insurance usually covers you for the rebuilding of your property in the event of total destruction by fire. It will also cover you if damage occurs as a result of storm or flood, as well as more minor calamities! It's a good idea to pay a little extra to be covered for accidental damage. Although insuring the contents of your home is not compulsory, it would be imprudent not to consider this very valuable protection.

What aspects should I consider when arranging my Home Insurances?

First and foremost your policy should cover all your needs. You should also ensure that you are getting appropriate value from the premium you pay! However, it is very important to remember that the cheapest isn't always the best!

Check for the following:

that there are no hidden catches, and no nasty surprises
claims handling should be fast and efficient - you need to know that any claim will be dealt with promptly, especially if you're attending to an emergency
ascertain if your policy covers you for money, credit cards, pedal cycles, freezer contents etc., or is this an optional extra?
what is the overall limit for unspecified items of value?
what is the maximum you can claim for an individual unspecified item?
what are the costs for insuring individual specified valuable items on an all risks basis?
will you be insured for accidental damage?

Mortgage Payment Protection Insurance (MPPI) or Accident, Sickness and Unemployment Cover (ASU)

MPPI (Mortgage Payment Protection Insurance), and its counterpart ASU insurance (Accident Sickness and Unemployment Insurance), have been introduced to provide valuable cover if you lose your job, or suffer loss of income as a result of being ill, or having an accident. So you must ask yourself if you could afford to pay your mortgage if you were to lose your job, or you became too ill or injured to work?

It's highly likely that most of us would struggle - particularly because many mortgages these days are increasingly large because of increasingly high house prices. This type of insurance is designed to pay our mortgages if our income is at peril, and borrowers can have peace of mind for a relatively moderate cost. For additional detailed information, please see our page Accident, Sickness and Unemployment Insurance.

Life Insurance

The provision of Life Cover is extremely important in the event that either you or your partner dies prematurely. The protection is even more important when you have dependent children and the proceeds of your policy will help to protect your family after you die by providing a tax-free lump sum that could be used either to repay the mortgage debt, or invested to generate an income that could be used to supplement the family budget.

Naturally, the payment of money can in no way replace a loved one. However, it could help to provide a much-needed prop in the turmoil that an unexpected death can bring to a family by repaying the mortgage debt, and it means your loved ones won't have to worry about how the mortgage payments will be made.

Just a note of caution: some borrowers mistakenly think that their death-in-service benefits from work will be sufficient to cover the repayment of the mortgage. The danger here is that only one partner will be covered, and in the event of a change in company policy, moving employment, or becoming unemployed, the cover may cease altogether. Nevertheless, the death-in-service protection if in force at the time of premature death will go even further to ensure the security of your family.

Critical Illness Cover (CIC)

This cover is part of the suite of insurance protection policies that it is prudent to consider. Critical Illness Cover, or CIC (usually pronounced as 'Kick'), is designed to pay a tax-free lump sum in the event that the policyholder is diagnosed with a specified critical illness. The list of critical illnesses, often referred to somewhat morbidly as "dread diseases", includes the three main claims relating to:

cancer
heart attack
stroke

The lists of illnesses covered under Critical Illness Cover policies do vary considerably from insurer to insurer, some have but a few, whereas it's possible to find some policies that cover upwards of 30-illnesses. Generally speaking, the greater the number of illnesses covered, the better.

The following is a typical list of conditions, and their extent, that is likely to be found in a reasonably comprehensive CIC policy.

Alzheimer's Disease - permanent symptoms
Aorta Graft Surgery - requiring surgical replacement
Aplastic Anaemia - with permanent bone marrow failure
Bacterial Meningitis - permanent symptoms
Benign Brain Tumour - permanent symptoms
Blindness - permanent and irreversible
Cancer - excluding less advanced cases
Cardiomyopathy - of specified severity
Coma - permanent symptoms
Coronary Artery By-Pass Grafts - with surgery to divide the breastbone
Creutzfeldt-Jakob Disease (CJD) - permanent symptoms
Deafness - permanent and irreversible
Dementia - permanent symptoms
Encephalitis - permanent symptoms
Heart Attack - of specified severity
Heart Valve Replacement or Repair - with surgery to divide the breastbone
HIV infection - caught from a blood transfusion
Kidney failure - requiring dialysis
Liver failure - of advanced stage
Loss of hands or feet - permanent physical severance
Loss of Speech - permanent and irreversible
Major Organ Transplant
Motor Neurone Disease - permanent symptoms
Multiple Sclerosis - persisting symptoms
Paralysis of limbs - total and irreversible
Parkinson's Disease - permanent symptoms
Primary Pulmonary Hypertension - of specified severity
Progressive Supranuclear Palsy - permanent symptoms
Respiratory failure - of advanced stage
Stroke - permanent symptoms
Terminal Illness
Third Degree Burns - covering 20% of the body's surface area
Total and Permanent Disability
Traumatic head injury - permanent symptoms

So with Critical Illness Cover, the policyholder does not have to die to receive the sum assured. The cover is designed to provide a substantial lump sum when it is most needed. For instance, the funds could be used to repay your mortgage, or to buy private medical treatment. you may wish to improve the quality of life by converting your home to your specific illness, such as wheelchair ramps, or installing a stair-lift, or even building a downstairs extension. Or you may simply want to go on a long holiday with your loved one to spend some quality time whilst you can.

In summary, and how Shire Direct can help...

Protection is always a difficult subject to address because it focuses on gloom and despondency. Nevertheless, the provision of adequate protection must be confronted, not to do so would be irresponsible and unforgiveable if the worst were to happen.

Naturally loss of employment, illness or death cannot usually be predicted. However, the effects of these perils can create difficulty when it comes to paying your mortgage and other commitments, which could lead to you having to sell your home, or repossession.

So from the range of policies that we have discussed above, it's plain to see that taking the steps to ensure you are adequately protected against loss or reduction of income will greatly alleviate the difficulties associated with these perils. Remember, the following checklist is a good starting point. Ask yourself what would happen to you or your family in the event of:

You or wife's (partner's) premature death - would the mortgage payments still be affordable, or would your loved ones have to move into rented accommodation?
Your inability to work because of an accident or illness - could you maintain your mortgage payments along with all your other financial commitments? Did you know that missed payments on your credit record could affect your ability to get credit or mortgage products for years ahead?
Loss of income due to unemployment - if your mortgage payments fell into arrears, could you and your family cope with your home being repossessed?
You contracting a long-term or critical illness - could you continue to pay your mortgage, and could you cope with additional stresses on top of contracting a critical illness? Could you adapt to the change in the quality of your lifestyle?
A house fire or other property damage - if your home was to be gutted by fire, could you replace your essential possessions such as clothes, furniture, and bedding, as well as all your other belongings that you take for granted, for instance your tv, hi-fi, CD's, DVD's, cooker, fridge, computer equipment, washing machine, carpets, curtains, etc.
Burglary or theft of your home contents, wallet or other valuables - could you afford to replace the costs of goods and valuables that may have been stolen, damaged or lost? Think how much it would cost to replace jewellery, computer and photographic equipment, audio and TV's, bicycles, garden machinery, etc.

So to combat the consequences of these eventualities, Shire Direct can provide you with some or all of the range of insurance policies that, as a homebuyer, you are likely to need. All our Advisors are qualified to be able to advise and recommend on both mortgage and insurance products. Any sale of insurance is carefully assessed to ensure that the product is appropriate and needed. Our advisors will carefully analyse your Insurance Demands and Needs and provide you with a statement incorporating the Advisor's findings and their personal recommendation on the following protection insurances:

Buildings Insurance
Contents Insurance
Accident and Sickness Insurance
Unemployment cover
Life Assurance
Critical Illness Cover

By having the appropriate insurance protection, you will have the peace of mind and can be safe in the knowledge that you and your loved ones will be covered in the event of premature death, suffering a critical illness, loss of income due to unemployment, accident or illness, & loss or damage to your property.

Well that concludes our look at Mortgage Insurance and the different types of insurances available to help protect you and your loved ones from the unexpected - we hope you found it to be useful. If you feel we can be of assistance with your mortgage and insurance requirements why not call us on Freephone 08000 282 281, our lines are open 7 days a week from 8am until 10pm, or alternatively why not enquire online at any time. We'd love to hear from you and will be delighted to help in any way we can.

Enquire Online now, or call us today 08000 282 281 - our freephone lines are open 8am-10pm everyday! We'd love to hear from you!

The overall cost for comparison is 9.8% APR.
The actual rate available will depend upon your circumstances. Ask for a personalised illustration. APR variable and based on a usual case. Most customers are likely to receive a lower rate or the same rate as our overall cost for comparison rate - learn more about APR.

There are no upfront broker fees.
However, a fee may be charged on successful completion. An indication is that on conforming cases (straightforward applications with no or minimal adverse credit) a fee may be charged of up to 1% of the amount advanced, typically £795 and will depend on your circumstances.
For non-conforming cases (where case research and processing may be more complex due to adverse credit or unusual circumstances), a fee may be charged of up to 3% of the amount advanced, typically £1,995.

THINK CAREFULLY BEFORE
SECURING OTHER DEBTS AGAINST YOUR HOME.
YOUR HOME MAY BE REPOSSESSED
IF YOU DO NOT KEEP UP REPAYMENTS ON A MORTGAGE OR ANY OTHER DEBT SECURED ON IT.

Adding existing debt to your mortgage will increase the repayment term and overall cost.

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