Cover your mortgage against the credit crunch

With news of mortgage arrears, repossessions and redundancies rife, moneysupermarket.com warns consumers to fully insure themselves against the effects of the ‘credit crunch’.

The price comparison website found yearly standalone mortgage protection insurance, for a 38 year old with a monthly mortgage payment of £850, from as little as £21 per month; a small price to pay for peace of mind.

Figures released last month from the Citizens Advice Bureau saw mortgage arrears problems increase by 35 per cent in 2008. According to the latest research into causes of mortgage arrears2, unemployment accounts for 13 per cent of cases in the UK and illness for 14 per cent. Therefore more than a quarter (27 per cent) of arrears could have been prevented had the adequate insurance been in place.

Louise Cuming, head of protection at moneysupermarket.com, said: "With news of mortgage arrears, repossessions and redundancies widespread, insuring your mortgage against unforeseen circumstances such as unemployment or long term illness is essential. As we’re currently seeing mortgage rates and other day-to-day costs soaring, I’d advise people to think of mortgage insurance as any other household bill – it may prove a crucial addition to your finances and, even more significantly, prevent you from potentially loosing your home.”

To avoid disputed claims on policies such as mortgage insurance, applicants must be aware of the importance of full disclosure, making sure they thoroughly read all the small print before proceeding. On accident, sickness and unemployment issues for example, the following points are crucial:

Pre-existing conditions may not be covered for a specified period after policy inception
Risks may not be covered for a specified time. For example, unemployment cover may not kick in until three to six months after initial policy date
Some policies may not cover back problems or stress

Louise Cuming added: “With all types of insurance products it is essential to shop around for the best policy for your circumstances and costs. Policies such as mortgage protection can be complicated so customers should seek advice if necessary. Insuring against unforeseen circumstances is crucial in the current economic climate.”