HSBC offers mortgage cover

PUBLISHED : Sunday, 02 November, 2003, 12:00am
UPDATED : Sunday, 02 November, 2003, 12:00am

Mortgage holders worried about loss of income due to unemployment or illness can ameliorate the risk with a new insurance product offered by HSBC, one of only two policies of its kind available in Hong Kong.

HSBC's Mortgage Repayment Protection Plan, which is due to launch this week, offers coverage for residential home loans held with HSBC for both new and existing customers.

Cash benefits under the scheme are capped at HK$35,000 per month, and will be paid out under a scheme that enables policy holders flexibility in allocating the cash at their own discretion. The only alternative mortgage insurance plan is available through Standard Chartered Bank.

Ann Pearce, head of insurance products personal financial services with HSBC, says the insurance scheme can help reduce the debt burden during troubled times.

'Buying a home for most people is the most expensive purchase they will ever make, and it is important that customers protect not only this valuable asset but also their own credit rating,' she says.

'While life-insurance policies will provide cover for outstanding debt upon death, they do not offer financial support should the policy holder suffer from temporary disability, sickness, or job loss.'

Mortgage holders can choose from two basic plans with different levels of coverage.

Plan A offers disability coverage for 12 months and unemployment coverage for six months, with a premium of $50 per $1,000 of benefit for those between the ages of 18 to 39.

Plan B offers lower premiums with disability set at six months and unemployment at three months.

As a benchmark, homeowners under the age of 39 would be able to obtain plan A coverage of $10,000 benefit for $500 per month. An individual between the ages of 40 and 49 would be able to get the same coverage for $600 per month.

The policy will not be offered to construction workers, restaurant staff or container truck drivers.

Ms Pearce says mortgage insurance is increasing in popularity in Britain, where about 20 per cent of all mortgage holders opt for the protection.

Research in Britain shows that these policy holders tend to get their mileage out of the schemes as more than 23 per cent have made claims on their policies, with 51 per cent attributed to sickness, 33 per cent to unemployment and 16 per cent to accidents.

HSBC's total Hong Kong mortgage book for the first half of 2003 was $105 billion, with an average mortgage size of $1.12 million.