Property: Mortgage: The cost of mortgage cover

Competition to sell mortgage indemnity insurance has brought down prices compared to where they once stood. James Huard compares some of the best rates on the market.

Protecting yourself in the event of becoming unemployed or falling sick does not come cheap. Halifax's scheme would cost a borrower pounds 2,546.33 over 25 years to cover payments for a typical pounds 50,000 interest-only mortgage, assuming a notional 8.5 per cent variable interest rate.

Halifax's policy, which offers cover against sickness and unemployment, can include household bills for an extra pounds 5.06 for every pounds 100 monthly mortgage payment. The policy is open to new and existing customers.

Nationwide offers a scheme that can be adjusted to 12 months or 24 months of sickness or unemployment. Mortgage borrowers can add other bills.

Cheltenham & Gloucester, now owned by Lloyds Bank, has a plan that would cost pounds 2,500 to insure a pounds 50,000 mortgage. C&G's charges are different in that they involve a monthly payment of 50 pence for every pounds 1,000 borrowed. This is equal to pounds 25 for a pounds 50,000 loan.

Those who need to claim would additionally receive pounds 3 for each pounds 1,000 borrowed, each month. The policy is available for all C&G's mortgage holders and starts 60 days after a claim.

Cover from Midland Bank costs pounds 2,958.97 over 25 years, or pounds 5.88 per month per pounds 100 of monthly payments. The scheme also allows borrowers to insure additional payments, such as service charges or council tax, in blocks of pounds 50. Since 1995 it has been available to all mortgage holders.

New mortgage holders are offered six months free cover. The policy is dependent on borrowers working 16 hours a week and includes the self-employed.

Direct Line charges 5 per cent of the monthly mortgage repayment, or pounds 2,516.14 in total on a pounds 50,000 mortgage. The insurance is only available when a mortgage is taken out and if the policy holder works more than 16 hours a week and has not suffered a serious illness in the six months before entering the scheme.

Skipton Building Society offers mortgage holders free cover against unemployment, with insurance against accident and sickness available for an extra pounds 16.38 per month on the same-size loan. Royal Bank of Scotland offers four years of free cover against unemployment. Full insurance against accident and sickness is also free for three months, and mortgage holders are not forced to continue the scheme when that free period runs out.

After four years, the charge is pounds 6.03 per pounds 100 for full cover, and pounds 2.84 per pounds 100 to protect against unemployment only.

With only one third of new borrowers taking out insurance on their mortgage and one fifth of mortgage borrowers using the policy, many feel not enough is available for mortgage borrowers. Sue Anderson, from the Council of Mortgage Lenders, says: "We should be asking why the take-up of such cover is so low and how we can tackle this. There is a view that the state doesn't cover enough."

Despite the lower prices, whether more mortgage holders will adopt the new schemes available from the private sector or risk surviving without one, remains to be seen.