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Mortgage Protection: Is there an Alternative?

By: Adam Hugo

If you are taking out a mortgage for the first time, your lender may try to push you into taking out mortgage protection insurance at the same time. Be careful. It benefits them - they get a commission - but that doesn't mean it's the best thing for you.

If you feel the need of some sort of cover, take advice as to what your options are. You may find other products that are of more benefit to you.

* Permanent health insurance. This is sometimes called "income protection insurance". This type of policy is designed to pay out if you are unable to work through sickness or accident - not usually through unemployment although some policies do include this. It is more useful than mortgage protection insurance if you are self-employed, but isn't worthwhile if your employer has very good sick pay arrangements in place. If you are interested in looking at this type of cover, look for fixed premiums - premiums that stay the same throughout the life of the policy. You can also reduce your premium payments by agreeing to a delayed payout of 30 or 60 days. Take care that you are aware of what the exclusions are - they could include HIV/AIDS - related conditions, self-inflicted injuries or illness arising from misuse of alcohol or drugs.
* Critical illness insurance. This is a policy designed to pay out a tax-free lump sum if you are diagnosed with any one of a specified list of medical conditions. Choose your policy very carefully - there have been many complaints about insurers finding excuses to avoid paying out on this type of policy. It's essential to read the small print, even if you need a microscope to do so!
* Life insurance. This may be a possible alternative to mortgage protection insurance, either on its own or in conjunction with one of the others. It is designed to protect your dependants in the event of your death, including paying off the remainder of the mortgage.
* Self-insurance. Some people prefer to save up a sum representing six or 12 mortgage payments in a separate bank account, instead of taking out mortgage protection insurance. The advantage of this is that it can accrue interest, and if illness or redundancy doesn't arise, the money will still be there for something else! However, you need a lot of self-discipline to leave it alone if you find yourself in urgent need of cash for any reason.

The important thing is that you choose the plan that is right for you, whether it's mortgage protection insurance (MPPI) or something else, rather than letting yourself be bounced into buying an unsuitable product. If you're uncertain what to do, find an independent broker or financial adviser who will give you unbiased advice.

Article Source: http://www.FindAffordableInsurance.com

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