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.
