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Mortgage Payment Protection Insurance: What you need to know

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Mortgage payment protection insurance might seem like an additional expense, but it could get you out of a financial mess in the future if you’re unable to make your mortgage repayments. The UK  is currently experiencing a prolonged episode of economic decline which is expected to continue for some time. With this arises an assortment of issues and worries that will undoubtedly affect anyone with a mortgage. Although debt appears to be the contemporary norm, with loans and overdrafts becoming an expected crutch in many people’s lives, the one loan that can have catastrophic results if payments are not punctually presented is the mortgage.

Why might I need it?

A number of reasons can contribute to defaulted payments, including redundancy, illness and the breakdown of a relationship. Although in some circumstances homeowners can seek assistance from the Government to help maintain mortgage repayments, not everyone will receive help. Worryingly, even if you are found to be eligible, in most circumstances you are likely to only receive the equivalent of the interest on the mortgage.  If you add to this the fact that you may need to wait a considerable amount of time before financial assistance is given, the result of not possessing an insurance policy appears to project a bleak and uncertain future.

Mortgage payment protection insuranceMortgage Payment Protection Insurance (MPPI) can alleviate the bulk of stress caused by worrying about how changes in circumstances may ultimately lead to homelessness. Although not a legal requirement for those with a mortgage, it would certainly be advisable to ensure you are covered with MPPI. The majority of policies will pay your mortgage for a year, giving you ample time to (depending on each individual’s circumstance) find other employment, recover from illness or to save in preparation for the following year’s mortgage repayments.

Choose Your Policy Wisely

As with any insurance policy, terms can differ from each provider and some MPPIs will only pay for three months’ worth of Mortgage repayment. It is also imperative that you are aware of the maximum amount you can claim: in many instances the maximum you can recoup is between £1500 and £2000 and therefore contingencies must be made for the excess needed if your mortgage repayments are more than these amounts.

Which Policy is Right for me?

There are various factors to take into account when shopping for Mortgage Payment Protection Insurance and these will depend quite heavily on your individual circumstances. For instance, if you already have considerable savings, you may not need cover at all, especially if you know you can pay your mortgage for a year. Similarly, if you become temporarily incapacitated due to illness and your employer offers a considerable amount of sick pay, then you could potentially forgo MPPI.

Whatever insurance plan you opt for will usually pay out after 31 or 60 days from the date you could not work. You should however be able to backdate claims and it is imperative that you clarify whether your insurance includes a “back to day one” policy or not.

Important Extras

  • Avoid “doubling up”

Before rushing out to get insurance, check that you do not have any other type of policy which will cover you in the event of prolonged illness, such as Employment Protection Insurance (EPI). This policy will not be relevant if you become unemployed and you would therefore benefit from MPPI even if you have EPI.

  • Unemployment short fall

The majority of Mortgage Payment Protection Insurance policies will not pay for the initial three to six months of unemployment claims.

  • Prior knowledge

Mortgage payment protection InsuranceIf you take out MPPI fully aware that redundancy is imminent or is even a possibility, you will not be able to claim and will lose any monies invested in the policy.

It would be wise to browse a varied selection of policies before committing to one as you will need to take into account your own circumstances and any eventualities you wish to be covered. Of course one cannot predict in all instances, but, if for example, you are in a highly demanding job which has the realistic potential to lead to health and safety issues, or are prone to illness, you will require insurance that can cover you accordingly. Always read the terms and conditions of any policy carefully and if you do not fully understand and terms it is recommended you seek professional advice from a reputable company or financial professional.

 

 

 

 

 

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About Denise Morgan

About Denise Morgan

Denise has five years' experience writing for various web-based companies. During this time she has also contributed to magazine articles and brochures. In addition to writing, Denise is a gigging singer/songwriter and is proud to have featured on the first series of BBC One's The Voice UK, having been selected by the great Sir Tom Jones. Denise is mother to the most talented and ridiculously intelligent two year old that has ever been and ever will be (until she creates another one that is). This kind of hyperbole is restricted only to her progeny and is not a reflection of her usual writing styles... Denise and her son live in Manchester along with their five cats - yes that's right, five.

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