Protection specialist British Insurance is now offering borrowers with a shared ownership mortgage (SOM) payment protection insurance…

With Gordon Brown announcing a drive on affordable housing and a desire to help people into property ownership, such borrowing arrangements are going to become increasingly more popular and protecting them effectively will be imperative if they are to be sustainable.

To date insurers have not been willing to provide this sort of cover to borrowers and have made it impossible for those in shared ownership schemes to protect themselves fully against accident, sickness and unemployment.

The cover is available from £2.15 per £100 worth of benefit and is available on a back to day one basis. Premiums are also age-rated to ensure that younger clients posing a smaller risk are not subsiding the greater risk carried by older applicants.

Important to FTBs

Simon Burgess, Managing Director of British Insurance said: “Shared ownership schemes are becoming more and more important in trying to help first time buyers and key workers on to the housing ladder. It is ridiculous that many insurers have not offered protection for the rental payments that make up the overall monthly financial commitment for these borrowers and the cover we are now offering aims to do that.”

In a shared ownership scheme, buyers normally purchase between 25% and 75% of the property in question, which they finance with a mortgage. The remainder of the property is bought by a local housing association, which then charges a subsidised rent to the owner for living in the house.

The monthly commitment under such a scheme is therefore made up of a mortgage payment to cover the share owned by the borrower and a rental payment to the housing association. To date MPPI has been available to cover the mortgage but not the rent.

Cover ‘makes sense’

Mr Burgess says: “What good is MPPI if it does not provide the level of benefit that people need? By excluding the rental part from cover it has been almost impossible for many borrowers in shared ownership schemes to protect their monthly outgoings easily and effectively.”

If insurers were prepared to offer MPPI for the mortgage, then Mr Burgess said it made sense to include the rental payments and ensure that in the event of making a claim the benefit was sufficient to meet clients’ monthly outgoings.

“By working to make protection relevant to people’s circumstances and charging rates which are affordable and offer good value, it is possible to help people stay in their property and afford their mortgage even if their personal circumstances change,” said Mr Burgess.