With the economic down turn and the housing market crash, there was a sharp rise in unemployment and housing repossessions.
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Though the market and the economy have recovered somewhat it has left people more aware of just how suddenly circumstances can change and how devastating and long lasting the affects can be. If there were any positives to be taken from what happened it would be that people are now much more sensible about not stretching themselves financially and increasingly people are looking for ways that they can help to safe guard their income and the roof over their head should they find that their circumstances change suddenly.
It has become more common for mortgage lenders to require their customers to acquire some manner of insurance policy as a condition of the loan. These policies are designed to protect mortgage payments or in some cases even completely repay mortgages. There are various policies available; life insurance, critical illness but one that is becoming more popular is employment insurance.
For a relatively small monthly premium, typically no more than around £20 per applicant per month these policies are designed to pay out should the policy holder find themselves unexpectedly out of work. Though the terms and conditions of these policies vary most are similar in their approach; they will pay out either a fixed monthly payment or a proportion of the applicants’ salary (this is usually up to 50% of the applicants’ normal salary subject to a maximum amount). These payments are made for a fixed duration of time, typically up to 12 months. This will hopefully provide the applicant adequate time to find new employment with the comfort that their monthly mortgage payments are still being met while they are looking for work.
There is usually certain qualifying criteria that the applicant must meet, such as being in their job for a certain amount of time before applying for a policy. The applicant usually needs to be outside of any probationary period or as a rule, be in their current job a minimum of 6-12 months. There is typically a minimum period after the policy is taken out that must pass before a claim can be made, usually at least 30 days. There is also a minimum period of time that must pass after a claim is accepted before the first payment is made. This can be anywhere from 1-3 months after the claim is made. The length of this period affect the monthly policy premiums, the longer the period the lower the payments will be.
Employment insurance is relatively inexpensive and with all the uncertainty about job security it is certainly a useful policy to have in place given the peace of mind it provides. It can also be combined with other insurance policies such as Payment Protection Insurance which also covers accidents and illness that prevent you from being able to work. These policies are slightly more expensive but cover a far wider range of circumstances that they will pay out for, providing more comprehensive cover.
If you are considering taking out Employment Insurance, like any insurance policy each company will have different terms and conditions, with some offering better terms than others. It always pays to shop around and with numerous price comparison websites designed to help you find the best deals it is worth spending some time to find the best option to suit your circumstances. Make sure that you look into the policy terms and pay particular attention to any exclusions mentioned since failure to do this could seriously affect your ability to make a claim through that lender at a later date. One thing that should be noted is that though not impossible it can be really quite difficult for self-employed people to qualify for Employment Insurance. For any self-employed individuals it is worth contacting a financial adviser or approaching the insurance companies direct to discuss your requirements and see what options may be available to you.
However you look at it, for a nominal monthly fee Employment Insurance is well worth considering as it provides policy holders the reassurance that should they unexpectedly find themselves unemployed they have at least protected their home.