When it comes to the complicated process of arranging mortgage protection insurance it helps to take impartial advice from a specialized broker or agent or perhaps rely of the wide-ranging resources available on the internet.
Here are four tips for shopping for the right income protection insurance to match your specific needs:
Do I need mortgage protection insurance?
A first step to establishing the viability of income insurance is whether you will have the available funds to continue to meet your financial obligations in the event of accident, sickness or unemployment. As a basic guideline, it is estimated that if someone doesn’t have the equivalent of at least eight months earnings in savings, there is a highly risk of financial hardship in the event of being made redundant.
These income protection policies are designed to cover the major financial obligations, such as the mortgage, utility bills, food, etc. for a predetermined time, which is likely to be in the region of 12 months.
The idea behind these insurance policies is to provide sufficient breathing room to enable you to continue meeting your monthly costs until you can successfully return to the work force.
Decide on the best time to apply for this type of insurance
You will likely find that the best time to buy for the income protection insurance is when you are in relatively secure full-time employment and where the chance of being made redundant is quite remote. Should the security of the job change in the future, you will have the peace of mind in knowing that your financial obligations will be met when your work life changes for the worst.
You will find that it will be too late to take out the insurance protection if you’re already aware that your employer might be announcing redundancies in the near future.
Knowing the different types of insurance policies
If you’re more mindful of the available policies this will make the decision-making process a far-sight simpler. If the major need is to keep on top of the mortgage payments, you will likely want to look at the availability of Mortgage Payment Protection Insurance (MPPI). MPPI is likely to be a great option if your savings are able to cover other day-to-day monthly costs (utility bills, card repayments, food, etc) and living expenses. You might also get the option to increase the payout on the policy by an extra 15 to 25% to help with covering other expenses besides the mortgage payment.
Alternative income protection policies for those without a mortgage can include lifestyle protection insurance and short-term income protection; these are ideal if living expenses are likely to be significantly more within the extra 15% to 25% permitted on the MPPI plan.
Choosing the right deferment period for your policy
Most, if not all of the insurance protection policies come with a deferment period, which is essentially a waiting period before you are able to start receiving payouts under the insurance policies terms and conditions.
For instance, if your employer’s offer an attractive sick pay scheme lasting in the region of 3 to 4 months on complete pay, you can of course agreed to a waiting period of 90 to 120 days. The longer you are able to accept the excess period, the lower the premium will be quoted by underwriters.