Mortgage payment protection insurance (MPPI)
Mortgage payment protection insurance (MPPI) is a type of insurance cover often sold as an attachment to a mortgage. It gives cover for a 12-month period in case you are unable to pay your mortgage because of an accident, sickness or unemployment.
For most people the family home is only as safe as their job. If, for whatever reason, you can no longer work, it's essential to make sure you and your family are protected - a mortgage payment protection policy gives you this peace of mind.
Most Mortgage Payment protection insurance (MPPI) policies are bought with mortgages. Some building societies offer special discounted policies but most lenders charge more than the general market rate - independent specialists can almost always save you money, and it really does pay to shop around when considering mortgage payment protection insurance.
The only possible reason why you may not want to move your MPPI cover from your mortgage lender is that many policies operate initial exclusions that prevent claims within a specified time, usually three to six months, after you switch. Some policies don't pay out to anyone predicted to go bankrupt or with pre-existing medical conditions when taking policies out, so you should be aware of this type of exclusion, take care to read any small text of the policy you are considering and don't switch if this is the case.
The price of MPPI doesn't usually depend on age, smoking or other factors that increase the likelihood of a claim but just on the size of your monthly mortgage payment - which makes the product very easy for you to buy online, meaning that you have access to even more excellent value mortgage protection policies.
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Case study
Mr Pearson, of Shotton in Flintshire, North Wales, wanted to make sure his GBP 30,000 mortgage was fully protected should he lose his job. He has taken out mortgage payment protection insurance.
Mr Pearson, a 50-year-old aircraft fitter, says:
'My mortgage is of great concern because there have been a few redundancies at my place of work, and the airline industry has suffered after September 11.
'Originally, I had my protection policy with my lender Alliance & Leicester but moved to Marks & Spencer and have saved GBP 8 a month by doing so.'
Like many homeowners, Mr Pearson was sold insurance from his mortgage lender when he could have got a cheaper deal by shopping around.
He adds: 'Although it would last for only 12 months, it would give me a bit of breathing space – and that kind of protection is important.'
Why would I need mortgage protection cover?
If you've been in an accident, or have been off work sick, you'd be surprised at how fast any full salary entitlement runs out: mortgage protection insurance fills that gap, meaning you can concentrate on getting fit and well again. Your income may be fine now, but wouldn't it be a good feeling of financial security to know that your home was protected?
How are premiums normally calculated?
The value of your premium depends on the value of your mortgage you need protecting, the lower the value, the lower your premium will be. Your premium will normally be based on a rate per hundred pounds.
How much of my mortgage can I expect to protect with mortgage insurance?
Typically with a mortgage payment protection policy you may insure 100% of your mortgage, but please note that there is normally a maximum limit. With an income protection policy you can normally insure a percentage of your total monthly income. You need to consider which type of policy is right for you.
Am I eligible for a mortgage insurance protection policy?
There are certain restrictions on application of cover, for full details you should check the providers' terms and conditions. Normally you would expect to have been full employment for a certain period of time in order to qualify for policy benefits under the unemployment section of the policy. In general you usually must not expect to be made redundant or have any expectation of unemployment. If you are self employed you will normally only qualify if your business is forced to close through actions outside of your control. Please make sure that you read and understand the terms and conditions that your mortgage payment protection provider operates, and make sure that you are covered.
Click here for a mortgage protection quote