Unemployment: How to cover the mortgage payments

Friday, 01 February 2008 12:00

The benefits of mortgage protection insurance are being promoted in a bid to prevent homeowners falling into trouble if they lose their income.

The move comes following the publication of worrying new research showing a quarter of the population has no idea how they would cope financially if they became unemployed.

The Association of British Insurers (ABI), which carried out the study, has produced a free advice leaflet highlighting the importance of protection and giving advice preventing people from losing their home in the event of unemployment.

With statistics showing 23 per cent of people will be jobless at some point in their working lives and UK debt rising, the ABI believes its message takes on extra urgency.

Nick Starling, the ABI's director of general insurance and health, said: "It is important when people are taking out a loan or a mortgage that they think about how they would meet repayments should they fall ill or become unemployed."

The ABI's research shows that taking out Payment Protection Insurance (PPI) on a mortgage made a "significant difference" to household finances.

Of those who had PPI, the so-called protection gap for debt and essentials was £1,300 less than those households which did not have PPI. Calculations showed a family without PPI were 74 per cent worse off compared to those who had a policy.

Mr Starling said it was important to choose the right PPI policy.

"Don't just pick the first one you look at, or the cheapest," he said. "Shop around to make sure it's the right policy for your needs."

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