Mortgage Payment Protection Insurance
What about state help?
One of the main reasons for purchasing any sort of protection
product is the long-term trend of the reduction in state
benefits. For instance, if you fall ill, suffer a serious
injury, or become unemployed for any reason, you will not
qualify for state help with your mortgage repayments until
nine months after you make a claim and then only if you
qualify for income support.
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) will carry
out your assessment and you must be incapable of doing any
work, not just your normal job, to qualify for state benefit.
Even if you do qualify, there is a reasonable chance that
you will not receive the full amount of your mortgage repayment.
As a result of this, the government is trying to work with
the Council of Mortgage Lenders to encourage people to take
out PPI policies for those first nine months when they won't
be able to claim benefits.
And if you are one of the lucky ones who receives a payout,
state benefits for a single person often amount to less
than £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?
