Two-thirds pay too much for mortgage cover

Nearly two-thirds of people are spending too much on insurance policies which pay off their mortgage if they die, research showed today.

The National Mortgage Helpline, an alliance of independent mortgage advisers, said around 62% of people who called were paying more than necessary for the cover.

A further 55% of people were paying too much for sickness and unemployment insurance, which covers mortgage repayments if the holder is unable to work or loses their job, the helpline said.

"A lot of people just settle for what they're offered by their mortgage lender, who may not necessarily be able to offer the most competitively priced solution to their protection needs," said Linda Levy, a mortgage specialist at financial adviser Over The Moon Solutions.

She added that rates had come down in recent years, so people who took out policies some time ago could also find savings.

Earlier in the year online broker Rhinoinsurance said that mortgage lenders were overcharging borrowers by more than ?8.2bn a year for mortgage protection insurance. The cover, which pays your mortgage for you if you can't do so because of an accident, unemployment or illness, costs from ?3.95 per ?100 paid out, said the website.

For an average mortgage payment of ?650, this means a bill of around ?25 a month. Yet Rhinoinsurance found that the top 10 lenders charge an average of ?5.78 per ?100, with Cheltenham & Gloucester charging a whopping ?7.70 per ?100.

"Just because a policy is more expensive doesn't mean it is better. The only difference in 99% of cases is how much commission is factored into the premium," said Rhinoinsurance director Andrew Areoff.