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Insurer Hikes Cost Of Protecting Home Loans

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Insurer hikes cost of protecting home loans

Legal & General has become the latest big-name insurer to raise the cost of insurance that covers mortgage repayments in case borrowers lose their jobs.

The move, which comes as arrears and repossessions are rising rapidly, has provoked outrage because it applies to existing as well as new customers.

L&G has about 50,000 customers who have taken out mortgage-payment- protection insurance. MPPI covers your repayments for up to a year in the event of job loss, illness or accident.

The insurer has lifted the cost of cover by up to 39% for all customers. So, on a £200,000 loan with repayments at 4%, or £1,055, premiums will rise from £44 to £61, taking the total cost from £1,099 to £1,116 a month. The average premium will increase by about 20%, L&G said.

Earlier this year, Pinnacle and Hitachi raised the cost of insurance by 40%, while Norwich Union increased premiums by 30% in January and Paymentshield raised them by 20%.

Melanie Bien of Savills Private Finance, a broker, said: “Someone who has been paying in for years should not be penalised and treated the same as a new customer.â€

MPPI claims soared 200% last year, said the Association of British Insurers.

Hmmm. The pot will run dry, if it hasn't already.

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I suspect that this has as much to do with a correction in the pricing of risk and the structural fall in the profitability of the insurance business as the likelihood of increased unemployment.

Then again, I don't think any of those three factors are fully priced in.

If you need to protect yourself through insurance of any type, I'd do it now.

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