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Mortgage Unemployment Insurance

Mortgage unemployment insurance, also known as payment protection insurance or PPI, has had somewhat of a bad press of late. In fact, UK banks were forced to set aside billions of pounds to cover claims of PPI mis-selling cases in 2011. This evolved from lenders selling mortgage unemployment insurance and other types of protection on loans and credit cards to customers that would not have been able to make a claim on their cover even if they needed to. Needless to say, after such a huge controversy, mortgage unemployment insurance is now much more closely regulated by the banks themselves and the Financial Services Authority. The ramifications of the mis-selling scandal are expected to rumble on for much of 2012 as more people try to make a claim for compensation on their mis-sold policies. Despite all the negative press, mortgage unemployment insurance along with mortgage deal advising can be very useful. The idea is that the policy would continue to pay your mortgage, or at least the interest on your mortgage in some cases, for a limited period of time.

Illness or Injury

If you're the main breadwinner in your household, it's highly likely that you and your family would struggle to meet your mortgage payments if you were to suddenly become unemployed. As there would only be limited help available from the government under such circumstances, it probably wouldn't be too long before you started to fall behind with your mortgage payments and slip into arrears. and although UK banks have been showing an unusual level of forbearance to homeowners who have found themselves facing financial difficulty, it probably wouldn't be too long before you could be left with no option but sell your home. This, on top of unemployment, would not be a good development. This is where mortgage unemployment insurance comes in.

Mortgage unemployment insurance would cover your mortgage payments or the interest on your home loan for a certain period after you have become unemployed. This will typically be for a period of around one year, but will vary depending upon which mortgage unemployment insurance policy you take out. This would allow you the breathing space needed to look for other work without the worry of having to find your monthly mortgage payments. As many people are only one pay check away from being effectively broke, this could be a real life saver from a financial point of view.

Becoming jobless without this sort of cover would present a very real problem. And with unemployment rising to record levels since the beginning of the recession, the risk of losing your job has not been so high for years. Having a mortgage unemployment insurance policy in place would mean you and your family would not face the prospect of immediately falling behind with your home loan if you did lose your job. Becoming unemployed can have a devastating effect on people, especially if they have no savings to fall back on. If you were to face unemployment and did have to sell your home, you would face the prospect of having to a smaller house. This could also mean your children having to change schools, or moving to an area where unemployment was even higher, making it more difficult to find a job. And what with private rents being so high at the moment, facing unemployment without any insurance and losing your home could be very expensive.

Finding Unemployment Cover

You can protect yourself against the threat of losing your job in part by taking out some mortgage unemployment insurance. Your insurance policy will give you the peace of mind of knowing that even if everything else were to be looking a bit grim; at least your insurance policy would cover your monthly payments. As mentioned above, you would then be able to focus your efforts on finding a job. As this can be time consuming, so the hours you save not stressing about where to find your loan repayments could work out to be invaluable. The furore over PPI in recent years has if anything made protection cover safer. The last thing lenders want is a repeat of the insurance scandal that rocked the industry at a time when it was being seriously buffeted by the effects of the credit crunch. The truth is, there's probably been no better time to take out this type of cover than now. This is not to say that you should not be on your guard when taking out cover. You should make sure you have a good overview of any insurance policy you plan to take out, particularly if it relates to you facing joblessness. Make sure you fully understand the benefits and the exclusions of your policy before you take it out. The consumer has some responsibility to make sure they know what they're getting into.

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