What is Mortgage Protection Insurance?

 What is Mortgage Protection Insurance?

If you were to suddenly to loose your job and you have a mortgage that you still have to pay you may find yourself in a very difficult situation. With the ever changing economic climate unemployment is rising and more and more of us are in this very situation. Mortgage protection insurance can be just the remedy for such a situation, this can help you pay your mortgage and still keep a roof over your head if you are unable to pay the mortgage repayment. Mortgage protection insurance will cover you for a percentage of your mortgage repayment as you will be able to make up the other part of the repayment with state assisted benefits. This type of insurance can cover you in the event of accident, sickness or unemployment. So if you were to have an accident that prevented you from paying your mortgage then this insurance is a good way of offering you protection. If you were to suffer from sickness that prevented you from working and paying your mortgage or if you were to be made unemployed and this stopped you from paying your mortgage this form of insurance would be very good. Mortgage protection insurance is normally a shorter term policy and is normally taken to pay you over a maximum of 12 months. Due to this fact this is a relatively cheap form of insurance and the plans that offer cover to retirement can be substantially more expensive.

Unemployment is sad and depressing in whatever form it may be. People who are unemployed for one or the other reason are not able to enjoy peace of mind and are always thinking of finding a job for themselves. Some people are able to save enough bank balance to help themselves during such unanticipated periods; some get benefit from their mortgage protection insurance whereas others start looking for other jobs. People with mortgage protection insurance are usually able to maintain income during their unemployment period provided its cause is covered under their mortgage protection insurance policy. Here are some types of unemployment that one may face in his lifetime that mortgage protection insurance would help to protect against:

1. Frictional Unemployment
   
   It is a kind of unemployment caused by employees moving between the jobs. For e.g.: people changing jobs or graduates. This type of unemployment is called frictional unemployment because a person remains unemployed just for a few days only. The reason for shifting jobs can be higher benefits, better salary than the present one. This type of unemployment is sometimes also known as “Voluntary unemployment”
2. Structural unemployment
   
   This type of unemployment occurs because of a mismatch of abilities in the labor market and it can be caused due to:
   • Occupational immobility
   • Geographical Immobility
   • Technological change
   • Structural change
   Occupational mobility refers to the problems that one faces while grasping new skills that are applicable to the respective industry or technology. The geographical immobility refers to problems in moving places to get work. Technological change on the other hand represents fall in the demand of human labor when the industries switch to better technology and equipments.
   
   Structural change in the economy represents that type of unemployment when decrease in certain area (coal mines) leads to reduction in the demand of employees (coal miners). These people may further face difficulty in adjusting with other jobs that demand more technical knowledge.
3. Real Wage Unemployment:
   
   This type of unemployment may occur when the labor market rises over the equilibrium. Real wage unemployment is also sometimes known as “disequilibrium" unemployment. The reason for such unemployment is minimum wages or trade unions.
4. Cyclical Unemployment This type of unemployment occurs when the economy of the country is under its full capacity. For instance, when AD goes down in a recession, output will also fall and thus companies will employ workers as they are making fewer goods.
5. Seasonal Unemployment
   
   This is a common form of unemployment and many people are aware of this type. There are certain months in a year when employment ratio is higher as compared to other months. The government of UK produces a timely adjusted unemployment figure to work on it.
   
   The types and forms of unemployment keep on changing and arising from time to time. There are many other forms and names given to different types of unemployment that a person may have to face in his life. These are often names as per the situation and seriousness of the unemployment.

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