Charity proposes new income protection insurance
The Joseph Rowntree Foundation, the charity with an interest in social policy, is recommending that a new type of insurance be put in place to provide a safety net for people at risk of losing their homes.
The Foundation is calling for the formation of a Sustainable Home Ownership Partnership (SHOP) which could provide cover for total mortgage repayments for 10 months, should a homeowner be unable to work through sickness or an accident, or if they become unemployed.
The scheme would be set up as a partnership between the Government, lenders and borrowers, with the aim of providing much cheaper insurance than is currently available.
The charity estimates that less than one in five homeowners has any form of private insurance to cover loss of income.
In addition, since 1995, help from the income support for mortgage interest scheme (ISMI) has been severely restricted, with most homeowners having to wait for nine months before they qualify for any state support.
The Council of Mortgage Lenders has predicted that in 2008, repossessions could reach 45,000, the highest level since the mid-1990s when around 300,000 people lost their homes over a five year period.
Joseph Rowntree is predicting that if the circumstances were repeated today, the number of people with serious mortgage arrears would be 25% above the mid-1990′s level.
The SHOP scheme could provide cover for around £3.40 per month for every £100 of mortgage repayment.
The Foundation is suggesting that borrowers pay 50% of the cost, with lenders and the Government both contributing 25%. The money could then be used to buy block insurance or build up reserves.
Category: Insurance News
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