Ignore insurance at your peril!
Lack of insurance is the latest threat to already-stretched UK homeowners, PG Mutual has warned.
As the general election looms, confusion over potential mortgage increases and concerns over housing costs are at a high, according to the insurance provider.
But it is warning homeowners not to ignore the threat income loss due to illness or accident poses to keeping up with their mortgage repayments.
PG Mutual said one of the biggest threats to the stability of borrowers' mortgage repayments is one that no one seems to want to think about – that of unexpected illness or injury.
The consequences of this could potentially force home owners onto long-term sick leave – which could see them trying to manage repayments on Statutory Sick Pay which averages at £87.55 per week.
Shelter reported at the start of the year that 60% of people in the UK were struggling with their housing costs and more than three million homeowners were concerned about missing their mortgage repayments in January.
Yet it appears many UK workers have no plan or protection in place should they become unable to work, with only 4% having income protection insurance.
Historically, many have assumed their employer will pay them their current salary until they are better – unfortunately this is often not the case. Worryingly, a survey by PG Mutual found 76% of people had no idea how much SSP they are entitled to – with many assuming it would be more than the current rate.
While no one likes to think about falling ill or having an accident, statistically a person is three times more likely to have to take sick leave during their working life than they are to die – something which would usually not be covered by common policies such as life and critical illness insurance.
Macmillan reported over 250,000 cancer patients were struggling to keep up their housing payments at the end of 2014 – and with potential rate rises likely following the general election, PG Mutual has urged homeowners not to ignore the threat having to take sick leave can pose.
PG Mutual health and wellbeing chief executive, Mike Perry, said: "We are constantly reading reports in the media concerning how stretched UK homeowners are already – and this is with many of them earning their full wage.
"No one likes to think about getting ill and having to take time off work but if you ignore it you could find yourself suddenly short of what you need to pay your mortgage. And the last thing someone needs when they are already going through a difficult time is a threat to their home."
There are two options for protecting your mortgage repayments in the event of long-term sickness – Accident, Sickness & Unemployment insurance (ASU) and Income Protection Plans (IPPs).
ASU will cover your mortgage payments for up to twelve months, if you cannot work due to accident, sickness or unemployment.
It is sometimes known as Mortgage Payment Protection Insurance Insurance (MPPI), and should not be confused with Payment Protection Insurance (PPI), which has been the subject of mis-selling by the banks, and is not a product that we recommend.
Income Protection Plans will provide you with a tax-free income after a waiting period (say 3 – 6 months), and will be paid to you until you return to work or retirement age (whichever is sooner).
To find out which one of these products is most suitable for your particular needs, please contact Matthews IFA Ltd, and we will be happy to advise.