Societies argue that the responsibility for setting up the policies rests with borrowers who must ensure that they are making endowment payments

Societies argue that the responsibility for setting up the policies rests with borrowers, who must ensure that they are making endowment payments to the insurance company as well as interest payments to the lender. Borrowers all too often assume that the monthly payment to the lender includes an endowment premium as well as the interest. In the absence of clear evidence that the borrower has been clearly warned of this responsibility, the Ombudsman tends to rule in the borrower's favour. But the likely compensation clearly will not cover the shortfall - so, in their own best interests, borrowers are advised to check for themselves whether or not their monthly payments do cover their premiums as well as interest.Equally surprisingly there is a steady trickle of complaints that societies have been collecting monthly payments on repayment mortgages that are not sufficient to pay off the mortgage by the due date. In such cases the Ombudsman has tended to order the building society to credit the borrower with 50 per cent of the shortfall.This, however, can still leave the borrower with a problem that ought not to exist in these days of advanced computerisation.Many societies are still failing to explain to borrowers exactly what is covered and what is not by mortgage payment protection policies and mortgage indemnity policies. All too often borrowers agree to take out such policies with only the haziest idea of what protection they offer.This issue becomes all the more serious if the Government decides to go ahead with plans to reduce state payment support for borrowers who lose their jobs - leaving them to take out private insurance cover instead.

Mortgage payment protection policies are designed to take over the payment of mortgage interest if the borrower is unable to do so as a result of illness or the loss of a job and income. But many claims are being refused, usually on the grounds that the borrower has failed to read the requirement to notify the lender of specific risks - which include existing medical conditions or impending redundancy programmes - or that the borrower was employed on short-term contract rather than being in regular employment. In one case, the Ombudsman ruled that the lender had failed to refer a borrower, who suffered from asthma, to these policy exclusions, and that if the borrower had known of the exclusions he would not have taken out the policy. But he only received repayment of the premiums, plus pounds 150 for inconvenience, and not the mortgage cover that he had hoped to get.Another continuing cause of complaint has been mortgage indemnity policies that lenders normally require borrowers to take out if they borrow more than, say, 75 per cent of the value of a property.

This is in case the property value falls, the borrower fails to maintain payments and the lender is forced to reposses the property and sell it at a loss. Many borrowers still assume that since they are required to pay the premium, they should be entitled to some compensation when the claim is activated.Not so, of course. The borrower pays the premium but the insurer pays the lender, not the borrower, to cover losses. Worse still, the insurer retains the right to pursue the unfortunate borrower for any remaining assets, to reduce the insurer's payout. Lenders often refuse to allow the borrowers even to see the policy documents that support the insurer's claim, on the grounds that it is commercially sensitive information or might, in law, justify the borrower's claim to part of the insurance payment.These payouts have cost the insurance industry several hundred million pounds in the last few years.