What the next step is also is whether to bother to insure, the main reason for the change in purchase is the fact that property prices are spiralling up and up, and todays prospective home buyer cannot afford property on a capital repayment basis, this of course is not the case with everyone, but especially those people with little or no deposit and in some cases bad credit. The problem lies in the fact that if they cannot really afford the mortgage on anything but an interest only basis, then will they bother with the insurance. I of course would not recommend that anyone purchase a property on the grounds that one day they will resell it to pay off the debt incurred or who could not afford to pay the same mortgage on a repayment basis. But I do know that this is practiced in other places from what I have been informed by my clients.



So this leads me to the next question if a client cannot afford the mortgage on a repayment basis, for whatever reason, then will they be in a position to insure themselves or their property, in the unfortunate event that something untoward happened. Lets face it none of us want to die, but that does not stop it from happening. So what advice would the advisors who allow people to go ahead with the prospect of an interest only basis mortgage, purely because funds would not permit any other form of repayment tell their clients?

I had a case just like this the other day, a potential client had been informed that my services were good and that they should try me before staying with their current arrangements in case I could do better. Anyway the gentleman started by telling me what he already been told he could have, the charges which might I add were a little excessive, and then went on to explain to me what insurances he would need, at this point I became slightly concerned, the mortgage itself was pretty high considering his income, and the current financial commitments. So I queried how he intended to repay, which was where he stated that either in 25 years he would sell, or as much as he didn't want to see his parents pass away if they did he would sell their house and his share should more or less cover it. Anyway I nodded and said what insurances do you believe would assist you at this point we had already discussed in depth and I had given him lots of paperwork explaining the different types of insurance and how they would benefit. He replied that banks always insure their property stock anyway so buildings insurance would not be necessary, regarding contents, not really bothered as he has a dog. Life insurance, if he died his wife could sell earlier than planned and use the money in the equity, and the rest were a waste of money. To say I was shocked would be an understatement, yes it is true we possibly do not need to cover ourselves for everything but to have a reason for absolutely everything was a bit of a joke. I put him right on a few facts, regarding the insurance, but I knew even with my information he would be the type of client that will probably know best, and not bother. His mortgage I could not beat, in fact I could not even match, with his current circumstances, and affordability.

What I fear is that one day these people will end up worse off, because they have listened to their mate in the pub and decided that interest only is the best way to go, and insurance is a thing of the past.

Lenders do not insure buildings, they trust the client to protect their assets themselves, if they insured them as standard practice I am pretty sure interest rates would reflect this and be higher.

Do not fall into the trap of thinking that your loved one will be able to manage without your income to assist in the matter life insurance can cost as little as £20 per month, that is a cheap price to pay to cover the house in your demise.

Your contents well that's your business, having a dog may protect against burglary but what about fire? Its your call can you afford to replace everything.

Look at these statistics for critical illness cover and accident sickness and unemployment, only you know if you feel its necessary, statistics are real hard facts.

· 90 families a day had their homes repossessed in 2000. The majority due to the financial problems associated with unemployment

· One in three people aged between 25-34 have experienced unemployment for a period in excess of one month

· Almost one in five working age households (3.4 million) have someone who is currently unemployed

· Today in Britain there are over 1,000,000 persons who are registered as unemployed

· Every day 500 people in the UK become unemployed. 60% of unemployed men and 45% of unemployed women will be out of work for six months or more

· Every adult in Britain is five times more likely to suffer a serious disability than die before the age of 60

· Today in Britain, 2,900 people will start claiming State disability benefits

· 1,800,000 people in Britain are already disabled and have been unable to work for 12 months or more.

You can no longer rely on the Government. State benefits for a single person are currently under £60 per week. Could you manage on that? The typical state benefit for two adults with two children is £96 per week; the maximum is £134 per week. Could you support your family on this?

Since October 1995 new mortgage borrowers will receive no state help for the first nine months of unemployment or disability. Existing mortgage borrowers receive nothing for the first two months, only 50% for the next four months and then full benefit for mortgages of up to £100,000 provided they qualify for Income Support. The Government themselves estimate that 70% of mortgage borrowers will not get Income Support due to savings, income, or a working spouse or partner.

In 1998 alone, the introduction of a new incapacity criteria resulted in 102,000 claimants being turned down for state benefit. An independent doctor (not your own GP) will carry out your assessment and you must be incapable of doing any work, not just your normal job, to qualify for state benefit

So in light of all the evidence to the contrary can you or should you risk it?