Mortgage Payment Protection Insurance Benefits & FAQ
Mortgages, although a fact of everyday life for the vast majority of people, do constitute a major debt. Home owners who have a mortgage will not always have the resources to cover their loan repayments in the event of an interruption to their income for any reason.
The reasons for needing mortgage payment protection insurance include redundancy, accident or illness. The balance between covering all expenses and not being able to afford your mortgage could be caused by a simple stroke of bad luck. Not having an insurance policy in place to cover your mortgage could result in your home being repossessed. Mortgage payment protection protects against this eventuality.
The insurance policy can be taken out in order to cover the outgoings of a borrower for an extended period – usually up to 12 months, although 24 month policies are available too – in the event of them being unable to work due to health reasons or being made redundant. In theory, this makes MPPI a simple and effective product that every borrower needs.
However, the cost of this type of insurance varied enormously between specialist mortgage payment protection insurance companies and major banks and building societies. Many borrowers have simply taken the first MPPI product offered, unaware that they are paying over the odds for their policy.
MPPI is a useful and effective product, and provides guaranteed peace of mind to policyholders. Educating oneself about the benefits and the pitfalls of the product only enhances this.
Who does mortgage payment protection insurance protect?
The borrower, or more properly, the commitment to repay the borrower’s mortgage is protected by the policy. Borrowers that are made redundant, have an accident, or fall ill are provided with insurance to repay their mortgage.
How long does mortgage payment protection insurance last for?
In most cases, policies will pay the mortgage for up to 12 months if the borrower cannot work due to health or involuntary unemployment, although 24 month policies are available as well.
What is age-related mortgage payment protection insurance?
Age-related mortgage payment protection insurances, are good news for first time buyers, because they are usually cheaper for young people. Borrowers have their premiums calculated based on age and level of cover. Having said that, as we use a whole panel of providers competitive rates are available to older homeowners too – the key is knowing who is quoting favourably.
Does age-related mortgage payment protection insurance become more expensive as the borrower gets older?
Not in some cases, although this does depend on the insurance provider. Young people benefit from age-related MPPI because they are less likely to develop serious health problems, and are more employable should they become redundant.
Is age-related MPPI suitable for everyone?
No, age-related mortgage payment protection insurance is not suitable for everyone, particularly those who have serious medical conditions on an exclusion list. Like any insurance policy linked to health, policyholders must be open and thorough in disclosing their medical history. MPPI does not cover those who take voluntary redundancy.
What are some important exclusions of Mortgage payment protection insurance?
Major exclusions, which everyone looking to take out MPPI should bear in mind, include: Alcohol and drug abuse, involuntary unemployment if claimant was not in continuous employment for six months, involuntary unemployment due to misconduct.
Why would someone not choose mortgage payment protection insurance?
Common reasons for not choosing Mortgage payment protection insurance include financial security of self, spouse of family. Furthermore, some people choose income protection insurance as a product, although this does not cover for involuntary unemployment. Some employees are entitled to sick pay over an extended period.
Doesn’t the government help out in this situation?
For some people who have very little sickness cover at work, some aid is provided. However, the criteria make it hard to qualify.
Does MPPI come under other names?
Confusingly, mortgage payment protection insurance is sometimes called accident, sickness or unemployment cover, or payment protection insurance. MPPI is also known as mortgage protection insurance.
Can I cover the cost of my home insurance with MPPI?
Although specifically attached to a mortgage, MPPI can also cover payment on mortgage-related outgoings, including home insurance, and life insurance.
When does the first mortgage payment protection insurance payment arrive?
There is normally a waiting period between claim and payment, between 30 and 60 days. This is known as your excess period, and you should discuss your options in more detail with your advisor.
How does one make a mortgage payment protection insurance claim?
Depending on your situation, you will need to establish the validity of your claim. For instance, in case of redundancy you will need a redundancy notice. For illness or injury your doctor may need to verify your claim. |
