Shelter for the sacked

Lenders are offering cheap insurance to compensate for cuts in state benefits, says Clifford German; Only one borrower in 10 currently has an insurance policy to cover mortgage repayments in the event of illness or redundancy

MOST mortgage lenders could be offering free or cut-price mortgage protection policies to cover mortgage interest and other essential payments after the Government cuts financial support for home owners who lose their jobs after the end of September. Most lenders have still to show their hand, but a steady trickle of new offers is building up and there are signs that cheap or free protection is beginning to compete with mortgage discounts as a way of attracting business.

Only one borrower in 10 currently has insurance cover to protect mortgage repayments in the event of illness or redundancy, and many existing policies have been found wanting because they do not cover those most at risk, especially contract workers, the self-employed, those with existing medical conditions and those working in industries threatened with redundancies.

New policies being introduced will cover contract workers and the self- employed if they are in regular work, but the waiting time for payments to start can vary, as can the duration of cover. Some cover only new borrowers, others are being extend- ed to existing customers.

The amounts paid out by the new policies will range from covering the mortgage interest only to covering interest plus essential bills. Premiums range from nothing to pounds 4.50 a month for every pounds 100 of benefit paid out each month - roughly pounds 12 a month on an average pounds 50,000 mortgage. This is still a substantial saving on current mortgage protection policies, which cost around pounds 7 per pounds 100 of benefit or pounds 21 a month on a pounds 50,000 mortgage.

Trustee Savings Bank is offering new borrowers who take out a mortgage during September a free MortgageSure policy for the next 12 months, to cover payments in the event of redundancy, sickness or accidents until state support takes over after nine months.

Britannia Building Societythis week offered new borrowers 12 months free mortgage protection against unemployment and launched two insurance policies to provide longer term cover in readiness for 1 October when the Government will drastically reduce benefits for home owners who fall ill or lose their jobs.

Borrowers can buy accident and sickness insurance for pounds 3 a month per pounds 100 of cover, to sit alongside the free unemployment insurance. Accident, sickness and unemployment in- surance will be available separately for existing borrowers at pounds 3 a month per pounds 100 of benefit, and a combined policy will cost pounds 6, a 10 per cent reduction in current premiums.

Benefits include mortgage interest and up to pounds 300 a month for regular bills, and they last for up to 12 months. But no payments will be made for the first 30 days to new borrowers, or 90 days for existing borrowers

Britannia joins the Skipton Building Society, which won praise from the Prime Minister in June when it pioneered free unemployment benefits for all new borrowers regardless of their job conditions. Skipton borrowers who lose their jobs receive nothing for two months, then get seven months cover until the reduced Government support takes effect. Skipton's premiums for full accident, sickness and unemployment cover for existing borrowers are being cut to pounds 4.50 plus insurance tax, per pounds 100 of interest payments covered.

The Market Harborough Building Society is offering borrowers free unemployment protection, to be paid after 30 days out of work, until Government support begins after nine months. Accident and sickness protection is available at pounds 2 per pounds 100 of interest payments covered.

Earlier this month, Hinckley & Rugby Building Society introduced free mortgage payment cover for the full nine months before state support starts to new borrowers after 1 October.

Other lenders have yet to clarify their policies. National Provincial is almost alone in having already introduced its Income Replacer policies, which offer graduated premiums starting at pounds 4.55 a month per pounds 100 of benefit for accident, sickness and unemployment cover combined, payable for nine months starting after 30 days out of work.

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When I was supporting Ray La Montagne I was six months pregnant. He had been touring for a year and he was exhausted and full of the cold. I was feeling motherly, so I would leave presents for him and his band: Tunnock's Tea Cakes, cold remedies and proper tea. Ray seemed painfully shy. He hardly spoke, hardly looked at you in the face. I felt like a dick speaking to him, but said "hi" every day. </p>
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He was being courted by the same record company who had signed me and subsequently let me go, and I wanted him to know that there were people around who didn't want anything from him. At the Shepherds Bush Empire in London, on the last night of the tour, Ray stopped in his set to thank me for doing the support. He said I was a really good songwriter and people should buy my stuff. I was taken aback and felt emotionally overwhelmed. Later that year, just before I had my boy Louis, I was l asleep in bed with Radio 4 on when Louis moved around in my belly and woke me up. Ray was doing a session on the World Service. </p>
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