How to protect your lifestyle

Sometimes it is possible to hear some quite extraordinary views about the nature of insurance protection and lifestyle.

Occasionally these are close to being potentially dangerous myths and here are a few of the more typical ones together with a rational comment.

The government will help pay your mortgage if you can’t

Although not totally incorrect, this is very significantly misleading.

If you lose your income and are unable to continue repayments on your mortgage, your mortgage provider may be willing to help, where they can, for a short period. 

After that, they may inevitably move to repossession.

Government help in such situations is extremely limited.  It may relate only to helping with the interest repayments on your mortgage and it might be conditional upon you having used any existing financial reserves you have beforehand.

If you’re keen to protect your family home in the event of things such as redundancy or sickness, it might be unwise to rely exclusively on the government aid. 

That is why various forms of mortgage protection insurance exist, such as those policies offered by Drewberry insurance and others.

My employer is under an obligation to keep paying my salary if I am sick

That might typically be true but it is important to recognise some of the limitations implicit in that statement.

Firstly, sickness is only one thing that may rob you of your income.  If, for example, you are made redundant, the statutory minimum redundancy pay is actually relatively limited – particularly if you have not built up an extensive service record with the employer concerned.

Secondly, even in the case of sickness, your employer is under an obligation to pay you sick pay for 26 weeks only.  After that time, your income may stop and then you may immediately struggle to continue paying your mortgage.

That is why it might be advisable to consider things such as mortgage payment protection insurance.

Mortgage lenders won’t repossess your property if you are seriously ill

Unfortunately, there may be little hard evidence to support this assertion.

Of course, you may hope that in such circumstances your mortgage provider may be sympathetic but their patience is unlikely to be unlimited.  The one thing you perhaps will not want if you are long-term sick and unable to work is to have to start to worry about whether or not you and your family will be able to retain the roof over your head.

In order to fully protect yourself against such circumstances, you might wish to consider investigating critical illness cover – something that might generate income cover for you for an extended period, perhaps running up to your normal retirement age.

You can’t have two people insured for the same mortgage

Yes, you can.

As it is perfectly possible for a mortgage to be in joint names, it is equally possible to cover the joint risks associated with the two mortgage holders.  That might include life, sickness and redundancy type issues.

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