Mortgage repayment insurance for homeowners
Anyone who has a mortgage will no doubt have worried how they would manage financially in the event that they lost their income due to involuntary redundancy or incapacity (ie accident or sickness). It is a frightening thought that with just a few missed payments you could face going Court and even having your home repossessed. The good news is that you can protect your ability to maintain your mortgage repayments in the event of financial distress caused by one of these events, by taking out a mortgage repayment insurance policy.
Mortgage payment protection insurance – or MPPI for short – is an innovative insurance that protects homeowners against the financial fallout of losing their income due to no fault of their own. Should you need to make a claim on your policy, then you will start to receive a tax free benefit anywhere from one to three months after the event, depending on the policy you buy.
Some providers will offer the additional benefit of you being able to back date your claim to the first day of unemployment or incapacity, meaning that you do not lose out financially whatsoever.
This mortgage insurance payment will continue to run for one to two years’ (again, depending on the individual terms of the policy) or until you are back to work, whichever event happens sooner. This means that at a difficult time you can focus on your recovery or looking for a new job, rather than worry about having your home repossessed.
However, if you are feeling the pinch financially already, you may think that mortgage repayment insurance is something that you simply cannot afford, however much you think it is a good idea. But, by shopping around for the cover, you can get a deal that suits your budget, with cover starting from just a few pounds every month for every £100 worth of cover required.
Certainly, by buying your mortgage protection insurance from your mortgage lender, you could find that the cost is prohibitive. Independent brokers however can often offer cover at a much reduced price, without any loss of policy features and benefits, so never just accept the first quote for cover that you are given – look around at whom else is offering the cover as you can often make quite substantial savings on the cost of the premiums.
Another consideration when looking at buying mortgage repayment insurance is to check your eligibility for the product. As with all insurance cover, there will be some exclusions within the policy terms and conditions, typically people who are part time workers or are retired, and those with a pre-existing medical condition, so make sure that meet all the eligibility criteria before you sign up for cover.
Chosen wisely, mortgage repayment insurance can be a financial lifeline that will help you to maintain your mortgage repayments at a time when you have no income. It will make any worries about repossession literally melt away, leaving you free to find alternative employment or to recover.
Mortgage Protection Insurance What to Look Out For
Mortgage Payment Protection Insurance (MPPI) is a form of mortgage insurance designed to cover your mortgage payments, in case anything happens to cause you to lose your income.
You may find that when you take out a mortgage, your lender automatically offers you MPPI. Sometimes they try to give you the impression that it’s obligatory. But don’t let yourself be bullied into taking out their policy unless you are sure it’s the best one. You can often get a better deal by shopping around.
Maybe you feel you don’t want to do this. Taking out a mortgage can be a lengthy, exhausting and time-consuming experience. It’s incredibly tempting to grab the policy the lender offers you, rather than start another lengthy process. Especially if you don’t really know what you’re looking for.
However you could really save money by shopping around. Of course you want to find the lowest premium – but premium levels are not the only factor. Here are some pointers to help you know what else to look out for.
- Unlike most other forms of insurance, mortgage protection insurance policies usually ignore age, health, smoking/non-smoking etc. Just a few give reduced rates for younger age-groups – under 30 or under 40 – so if this applies to you, it’s worth checking this out.
- When will it pay out? Most mortgage protection insurance policies don’t start paying out till a month, or sometimes two months, after the problem (accident, redundancy, or whatever) starts. Now there are a few that backdate the payments to day 1, so you may prefer to choose one of those.
- What is the payout term? Most mortgage protection insurance policies limit their payout term – usually to 12 months. They reckon that most people will have found another job, recovered from their illness, or obtained state benefit by then. But this doesn’t always happen. Try to find one that will pay out for as long as possible – at least two years.
- What is the maximum payout level? Some mortgage protection insurance policies put a ceiling on the amount of their monthly payment during the payout period. If you have a bigger mortgage, or if interest rates have risen, this amount might not be enough to cover your repayments. Try to find out what the repayment policies are.
Sometimes it can be quite difficult to find out exactly what the payment policies are on different mortgage protection insurance policies. It’s worth consulting a broker to make sure you find the best possible deal.
UK Mortgage Payment Protection Insurance Understanding A Policy Is Essential
The key to making UK mortgage payment protection insurance work is to understand a policy; be aware of the key facts and the exclusions in a policy; and, how it can affect your circumstances. If not taken out with the exclusions in mind then a policy might not be right for you which would mean that it could be just a waste of money.
UK mortgage payment protection insurance can give you an income which would make sure that you would have the money with which to continue repaying your mortgage and so not get into arrears on the repayments and risk losing your home to repossession. You cannot rely on the income that the State offers as even if you do qualify for the help it usually isn’t enough to give the peace of mind that UK mortgage payment protection insurance can give – providing you are eligible to claim of course.
The UK mortgage payment protection insurance cover would begin to give you an income so that you could pay your mortgage repayments each month once you had been out of work for a certain length of time and this can vary from provider to provider. Cover can begin to pay from the 31st day of being out of work but it can be as long as the 90th day before the cover kicks in. However the majority of UK mortgage payment protection insurance policies will be backdated to the first day of coming out of work.
The cover will continue to payout and give you peace of mind and security for up to 12 months although some providers will pay for up to 24 months.
Exclusions which are common to all policies and which could mean that a UK mortgage payment protection insurance policy wouldn’t be suitable for your circumstances include if you are only in part time employment, if you are retired or if you have suffered from an illness within the past 2 years. You do have to make sure that you check out the small print of UK mortgage payment protection insurance policies as they can differ slightly from provider to provider and the best way to buy the cover is with a specialist provider of payment protection.
Simon Burgess is Managing Director of the award-winning British Insurance, a specialist provider of uk mortgage payment protection insurance, loan protection insurance and income protection insurance.
