Save your home from the sick bed

IF YOU are made redundant or forced to quit your job because of sickness or accident, how will you pay the mortgage?

Following changes to the provision of income support benefit, you certainly will not get much help from the welfare state. The only alternative is to buy your own mortgage protection cover, either as a bolt-on addition to your loan or as a stand-alone policy.

These policies will pay your monthly mortgage payments for up to a year if you are unable to work. They can also cover you for premiums for a mortgage repayment vehicle - such as an endowment - and other insurance. Cover is normally limited to 125 per cent of mortgage value.

But the policies are subject to strict qualifying conditions. Self-employed, disabled and contract workers need to be particularly careful about the cover they choose. In the case of self-employed people, the insurer will want to be sure you are genuinely and permanently out of work before paying a claim.

Your state of health when you take out the cover also makes a difference. Sun Alliance creditor insurance manager Len Wilcocks says: "If you're suffering from diabetes, we'll accept you into the scheme, but we won't pay out on a claim related to diabetes."

This type of insurance will typically cost you about pounds 5 to pounds 6 a month in premiums for every pounds 100 of your monthly mortgage.

Most policies will pay nothing for the first 30 days of any period of unemployment, the idea being to rule out periods of relatively short illness such as flu. If you are keen to keep the cost of your premiums down, you can select a longer period.

A 35-year-old male publishing manager with monthly mortgage premiums of pounds 450 living in the Exeter area would have to pay General Accident pounds 24.77 a month for cover if he selected the 30-day waiting period. The same amount of insurance would only cost him pounds 20.25 if he was prepared to wait 60 days.

Also available is a plan which backdates payments to the first day, but this will cost you more.

General Accident spokesman Tony Kerfoot advises: "You need to understand how and when claims can be made, and under what circumstances. You need to understand why there are waiting periods and how long those waiting periods are. And you need to understand that if you have prior knowledge that you are going to lose your job and then take out cover, the insurer is not going to pay your claim."

If you are taking out a 100 per cent or discount mortgage, you may find payment protection automatically included in the cost. Most new borrowers of any loan will be offered the cover as an option, and many lenders also sell mortgage payment protection as a stand-alone policy.

You may be able to buy mortgage protection cover more cheaply through a financial adviser, but make sure that you are comparing like-for-like before deciding which policy to buy. The cheaper one may contain more exclusion clauses which prevent you from claiming successfully.