Doesn't the state come to the rescue to help you meet you mortgage payments if you become unemployed or ill?

No. Help with mortgage payments through the benefits system is restricted to people receiving income support or income-based Jobseeker's Allowance. If you have savings of more than £8,000 you will not be eligible for income support and that means you will get no help with mortgage payments. If you become too ill to work but your partner works 24 hours or more a week, you will not receive income support or help with mortgage payments.

What state help is available?

Provided you are eligible for benefit, assistance will depend on when you took out your present mortgage. If you took it out before October 2, 1995, you will receive no state help for the first eight weeks. For the next 18 weeks, the state will pay half your mortgage interest payments. After that it will pay all of your interest payments.

If you took out your mortgage after October 2, 1995, less help is available. You will receive no assistance with mortgage payments for the first 39 weeks. After that, the state will meet all your mortgage interest payments. Benefit is limited to the first £100,000 of your mortgage and will not cover any capital part of your mortgage payments or pay premiums on a life policy or savings plan (such as an endowment) linked to your mortgage. Nor will it cover any mortgage arrears.

Ok, the state will not to my rescue if I become ill or lose my job. How do I ensure that my mortgage payments are met if personal disaster strikes?

You can rely upon your won personal savings but these can soon dwindle away, especially if your illness lasts a long time or you don't find a new job quickly as you expected. An alternative approach is to buy mortgage payment protection insurance. It is commonly referred to as accident, sickness and unemployment insurance and it provides financial protection for homebuyers who become unemployed or ill and are unable to work.

How does Mortgage payment protection insurance work?

With mortgage payment protection insurance you pay a monthly premium based on the cover you require. The level of cover depends on the size of your mortgage payments. If you become unemployed or are unable to work because of accident or illness, the mortgage payment protection insurance policy will pay your mortgage, usually by making direct payments to your lender. Benefit will normally be paid a maximum of 12 months though some insurers will pay for longer. Payments stop as soon as you return to work.

Can the insurance cover payment of premiums for savings plans or insurance linked to my mortgage?

Yes. It can cover monthly premiums on a endowment policy, an individual savings account or a buildings and contents insurance policy.

Are any age limits imposed on the cover?

Most insurers will cover you only between 18 and 65.

Are mortgage payment protection insurance policies available to the sel-employed?

Yes, but if you are self-employed you need to check the policy's small print thoroughly because exclusions can make claiming difficult. Most insurers will accept a claim only if you have involuntarily ceased trading and declared this to the Inland Revenue. Furthermore, you must have registered for Jobseeker's Allowance even though you may not qualify for benefit.

Contract workers need to tread carefully. Most insurers will accept a claim only if the work is either on an annual contract that has been renewed at least once or has been under contract to the same employer for at least two years. For workers on different contract arrangements a claim will be accepted only if they have spent at least six months with same employer and the contract has been renewed at least twice. In this case an insurer will pay only if the contract has been terminated early, and the benefit will be paid only until the date the contract would have expired.

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