Should permanent health insurance be compulsory for mortgages

All mortgages require life assurance. Should they also include PHI to cater for one of the mortgagees not being able to work due to illness?

No.

And they should not require life assurance either.

As a single person, I am paying mortgage protection for which I will get no benefit. My estate might.

There are couples in danger of losing their homes, who would be far better off paying the mortgage protection premium off their mortgage rather than to the insurance company.

Brendan

Cost issue I would imagine, PHI can be very expensive to take out and restrictive enough to claim on.

I always thought single borrowers with no dependants should have the option to take serious illness cover or phi instead of life cover as realistically the house can be sold if they die but if they are sick and can't work it's a bigger problem.

I'm not sure I agree Brendan on the couples issue, if the premium is small then I think you are better off keep up the life cover as a small premium is unlikely to make much dent on the mortgage anyway. Have seen some very sad cases where policies lapsed and then one died.

Brendan Burgess said:

No.

And they should not require life assurance either.

As a single person, I am paying mortgage protection for which I will get no benefit. My estate might.

There are couples in danger of losing their homes, who would be far better off paying the mortgage protection premium off their mortgage rather than to the insurance company.

Brendan

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Why do single people with no dependents require life insurance, anyway? I've recently arranged mortgage protection life insurance; while it wasn't that expensive, I just don't see the point in my having it. If I die over the term of the mortgage, which is rather unlikely, then I suppose my next of kin get the benefit of it, but realistically it's not like I'm supporting them or anything; they won't suffer financially by my death.

I suppose it makes sense from the bank's point of view if negative equity is a big risk, but certainly, say, someone with 50% LTV is highly unlikely to end up in negative equity.

The Consumer Credit Act of 1995 made mortgage protection compulsory except in certain circumstances so it's not the banks themselves that are insisting on it, the blanket requirement did not differentiate between single or joint applicants.

I think life assurance being compulsory is a good thing. PHI seems like a waste of money and very difficult to claim on. Better off putting the premium aside as a rainy day fund.

Trouble is the premium saved would get you nowhere if there was really a serious issue that stopped you working again.

PHI is a good idea if you can afford it and it suits your needs but realistically it couldn't be made compulsory.

That's a very good point Monbretia, it's very expensive, and you don't need that extra expense when you start out with your mortgage. I thought PHI only paid out for about 6 months. I wonder how many years of premiums it would take to give you 6 months income. Would depend on each case I suppose.

No, PHI is permanent health insurance, it pays out an income until you reach retirement age. In fact it usually doesn't kick in for the first 3/6 months at all.

You are probably thinking of mortgage repayment protector which pays your mortgage payments for up to 12 mths excluding 1st month is you are out of work.

Monbretia said:

The Consumer Credit Act of 1995 made mortgage protection compulsory except in certain circumstances so it's not the banks themselves that are insisting on it, the blanket requirement did not differentiate between single or joint applicants.

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Correct. But it should not be a legal requirement. It's a total waste for people with no dependants.