Unemployment Insurance?

Saturday, January 03, 2009

When you are happy and healthy, paying out for insurance to protect you against unwelcome and seemingly unlikely events can seem like a needless expense. So why bother?

One of the main reasons for purchasing any sort of protection product is the long-term trend of the reduction in state benefits. For instance, if you fall ill, suffer a serious injury, or become unemployed for any reason, you will not qualify for state help with your mortgage repayments until nine months after you make a claim and then only if you qualify for income support.

Well over three hundred thousand people receive help from the government with their mortgage payments under a scheme known as Income Support for Mortgage Interest (ISMI). Payments are calculated by taking the average interest rate of the top twenty lenders - if you are getting charged an interest rate higher than that average, then there will still be a shortfall between the ISMI payment and your mortgage repayment.

In addition, not everyone will qualify for an ISMI payment after nine months:

• If you have savings of £8000 or more, you will not be able to claim.
  
  
• If you live with your partner and he or she works an average of 24 hours or more, you will not be able to claim.

Even if you do qualify, there is a reasonable chance that you will not receive the full amount of your mortgage repayment. As a result of this, the government is trying to work with the Council of Mortgage Lenders to encourage people to take out PPI policies for those first nine months when they won't be able to claim benefits.

Regardless of your relationship with the lender, if you fail to make a payment for that length of time, you will be in extremely serious danger of having your home repossessed. Unless you have sufficient savings to see you through any hard times, it is well worth considering the options that are available for helping you get through such circumstances.

See also: Mortgage Payment Protection Insurance

What sort of insurance can I have?