Why is mortgage payment protection a waste of money?

ntlbell

I was reading I'm sure on this forum before but def on the pin that mortgage protection payments are a waste of money.

I can't recall anyone giving a concrete reason as to why, given our current economic climate is it a waste?

if so why?

is it hard to get them to pay out?

seamus

ntlbell wrote: »

is it hard to get them to pay out?

From what I recall, that was the overall sentiment and if you didn't read the small print you could be left out in the cold.
Afair, some of the main points were:

1. They would find whatever loophole they could to avoid paying out
2. There was a significant delay between losing your job and the first payout during which time you have to go look for work to satisfy the policy
3. When you did find a new job, you can't get another payout until you're in the new job for X months, but you still have to keep paying the premium.

Overall they seem to be good value if you face the prospect of medium to long term unemployment, but not if you only lose it for 6 or 8 weeks. I stand to be corrected though.

Kipperhell

All the above are valid issues with the payment. It did work out for me when I had it in place before . I checked many things out before taking my last job and am now worried there maybe a loophole for them not to pay. It is pretty much the same with all insurance though.

The delay in payment AFAIK is 30 days and then they start counting you as unemployed. Then every 30 days after that they pay. If you start work on day 20 of a 30 day count you lose that payment so they catch you going in and out. It works for 12 months. That was the policy I had so it could be different for others.

dny123456

Kipperhell wrote: »

It works for 12 months.

This was always the worst part for me. So if you intend to lose your job for more than 2 months but less than 12, it's great... but outside that not a lot of use. Better to save a little, so that you can meet repayments for 12 months yourself rather than depending on mortgage protection. A lot less red tape.

Also I'm told (by a former bank manager), that they will weasle out of paying for many different reasons. Its also a bit of a trap, in that you will be reluctant to take a new job, even if one is available, as you'll lose you mortgage repayments. A further disincentive to re-enter the workforce.

The_Conductor

dny123456 wrote: »

This was always the worst part for me. So if you intend to lose your job for more than 2 months but less than 12, it's great... but outside that not a lot of use. Better to save a little, so that you can meet repayments for 12 months yourself rather than depending on mortgage protection. A lot less red tape.

Also I'm told (by a former bank manager), that they will weasle out of paying for many different reasons. Its also a bit of a trap, in that you will be reluctant to take a new job, even if one is available, as you'll lose you mortgage repayments. A further disincentive to re-enter the workforce.

Its nigh impossible to save sufficiently to make repayments for 12 months- in case the worst happens. The average mortage repayments are between 1200 and 1600 a month- you'd need almost 20k in aftertax earnings saved to comfortably cover this for a year- and thats just mortgage repayments- never mind all other outgoings.

Kipperhell

dny123456 wrote: »

This was always the worst part for me. So if you intend to lose your job for more than 2 months but less than 12, it's great... but outside that not a lot of use. Better to save a little, so that you can meet repayments for 12 months yourself rather than depending on mortgage protection. A lot less red tape.

Also I'm told (by a former bank manager), that they will weasle out of paying for many different reasons. Its also a bit of a trap, in that you will be reluctant to take a new job, even if one is available, as you'll lose you mortgage repayments. A further disincentive to re-enter the workforce.

I think you are missing the point about "intending" to loose your job. Most people don't intend to be out of work any length of time. Given the current climate it can really show the benefits of such insurance. It is also worth noting that self employed people don't get social welfare payments as they pay S class PRSI. It would have made sense for a lot of such people to have taken out such a policy or take it out now if they can.

I remember there were some initial restrictions on even being eligible to get the insurance. I think you needed to have at least 2 years in your current job or your company operating for that length of time. It was also difficult to get with an existing mortgage as it was normally only offered to new mortgages.

There is little chance on a normal salary people can afford to save money enough to pay their mortgage for 12 months. Compared to the €50-€60 a month the insurance costs. There may be some red tape but filling out a form once a month doesn't make a huge difference and you are unemployed so you should have the time.

As with any insurance the company will try and avoid paying if they can. For anybody made redundant the process seemed pretty straight forward when I did it. The only issue I have now is that I took contract jobs which classes me as self employed and I think I may have had to have been successful for 2 years at that to get a claim.

One thing that was great was when I was made redundant I was out of work for about 6 months which got me 5 months payments did a 6 month contract and the payment protection restarted the 12 month count down again after that and I got another 3 months before working again. If all goes well I will get another 12 months count down. I wouldn't consider it a disincentive to work but rather a protection so you won't have to take the first job you can get.

Read the policy details yourself to see what way it works so you know of any restrictions. I have certainly paid less into it than I have received.

loyatemu

smccarrick wrote: »

Its nigh impossible to save sufficiently to make repayments for 12 months- in case the worst happens. The average mortage repayments are between 1200 and 1600 a month- you'd need almost 20k in aftertax earnings saved to comfortably cover this for a year- and thats just mortgage repayments- never mind all other outgoings.

also I presume having 20k in the bank would automatically prevent you from getting a number of means-tested social welfare benefits (the medical card for a start).

aernle

As far as I'm aware on this one, the general problem arises when, say there have been layoffs at the company you currently work for. Therefore you have reasonable reason to believe that your job may be lost in the near future. First reaction;take out mortgage protection.

If/when you make the claim the insurance company will (obviously) investigate, if they find out that your job was knowingly in danger at the time you took out the plan, they're not under obligation to pay out. So really it could just be extra money down the pan..

Kipperhell

aernle wrote: »

As far as I'm aware on this one, the general problem arises when, say there have been layoffs at the company you currently work for. Therefore you have reasonable reason to believe that your job may be lost in the near future. First reaction;take out mortgage protection.

If/when you make the claim the insurance company will (obviously) investigate, if they find out that your job was knowingly in danger at the time you took out the plan, they're not under obligation to pay out. So really it could just be extra money down the pan..

When I looked for PPP I found it impossible to get without a new mortgage it just happened that there was a second offer by the bank. So I am not sure if it easier to get now. Unless there is a particular notification given to yourself your job wouldn't be in danger.

Redundancies made in a company would not make it reasonable to assume you know your job is in danger. The companies could claim there is a recession so everybody's jobs are at risk following the logic you are using.

When I told friends I got a payout on this they kept telling me I was lucky as they all heard there are various loopholes. Nobody knew anybody personally but there was a big fear of it. People see it as more of a gamble. I'll let you know if it doesn't work out this time.

Amberman

Let me tell you about an excellent insurance product called permanent health insurance, or income protection. It is an incredibly profitable product for insurers.

• Fixed monthly premium
• Pays out after weeks 4, 13, 26 or 52
• Pays out a % of your salary...up to 70%
• Can insure pension contributions till you retire
• Pays out till you retire

Heres the catch...you have to be ill to claim....


Whats that Toto?....getting laid off and about to lose your house has made you depressed and stressed out?

Ok...heres your cash.

heres the beauty....you get paid till you get back into work. No jobs...not your problem...its your insurers.

dny123456

Kipperhell wrote: »

I think you are missing the point about "intending" to loose your job. Most people don't intend to be out of work any length of time.

I think u missed the point, it was sarcasm.... highest form and so forth...