If you're like most people, your home and mortgage is both your biggest asset and your biggest financial commitment. And if for some reason you find you're unable to meet your monthly mortgage repayments, it could turn into your biggest nightmare. Without some form of mortgage protection, the worst case scenario is that you end up losing your family home.



For most people, the Government provides little help. People whose mortgages were taken out in or after October of 1995 must wait 39 weeks before they are entitled to receive any mortgage help from the Government. Even after that, the Government only pays your interest, leaving the principal portion of your payments unpaid. If your mortgage is relatively recent, you might be able to get by with that, as conventional mortgage repayments are front-loaded with interest, but you've still got to wait nine months before you even qualify.

That's not the only problem, however. Once you qualify, Government Income Support for Mortgage Interest (IMSI) payments are calculated using a "standard" interest rate that is much lower than the rate at which most people obtain mortgages. Unfortunately, there's yet another issue. People with mortgages over ?100,000 experience additional problems, because IMSI payments only cover the interest on the first ?100,000 of any mortgage. It gets worse, however - IMSI claims are also means-tested. If one partner works more than 24 hours a week, or has savings of more than ?8,000, you are not entitled to claim any payments at all. Given all of this, it should come as no surprise that up to 80% of people who claim IMSI do not receive payments that cover their actual mortgage costs.

Creating Your Own Safety Net is the Best Option

Relying on Government aid will not provide much help in protecting your mortgage, so you'll need to investigate other options if you want the reassurance of knowing your mortgage payments will be taken care of in the event that you are unable to take care of them yourself.

If you opt for a mortgage protection plan that covers your mortgage repayments rather than paying your mortgage in full, you have two possibilities. The first is Accident, Sickness and Unemployment Cover (ASU), also known as Mortgage Payment Protection. If you lose your job or are unable to work due to an accident or illness, a mortgage payment protection plan will pay your mortgage, as well as associated costs such as home insurance, for up to twelve months. The downside is that you're not covered for pre-existing illnesses; however an advantage of this option is that you can purchase one or two types of cover separately if you wish.

A mortgage payment protection plan that covers you for unemployment can, for example, be used in conjunction with a second type of plan called Income Protection. This protection plan covers you for accident or illness that prevents you from working, and rather than providing you only with enough money to cover mortgage payments, you can opt for cover that includes a larger monthly sum to cover additional expenses. These monthly sums are tax-free, and are paid until you are able to work again, or even until you reach retirement age.

As with any financial plan that is designed to support you and your family should hard times strike, if you are unsure what cover or policy is best for you, take advice from an independent adviser. Don't just accept the first policy offered to you by your mortgage lender as many of these policies have been heavily criticized recently.