Choose an independent supplier of redundancy insurance
Right now, buying a Redundancy Insurance seems like a sound idea, after all the boffs are telling us that Britain UK is closed for business. It seems like the sensible option, until you start doing your research. It’s then that you find that these policies are members of the PPI family, which have been on the BBC recently.
But why? Generally its not the the policies themselves, but the way people were “sold” into them. Many lenders have sold Redundancy policies to people when loans are issued, without due regard to whether the policy was suitable or not. In addition, the object was to take the individual out of the market at point of sale, so that he or she would not shop around and find out that the policy was well overpriced. The Competition Commission has now ruled on this point and lenders can no longer sell Redundancy Insurance at point of sale. Well, better late, than never!
Redundancy insurance, does what the titles suggests, it can replace income, make mortgage or loan repayments, when you can’t, because for have lost your job through no fault of your own.
Ok, so where do you buy Redundancy Insurance.
Look for an independent firm, and not a brand belonging to a bank, building society or credit provider. Use the internet and find a firm offering a no commitment online quotation system. Make sure that you download the policy booklet and take the time to read the terms and conditions thoroughly. Look very carefully at initial exclusion periods, whether the policy offers back to day one cover or not, and the level the covered offered.
Mortgage Protection Insurance through your Bank – Vote with your feet
The Banks have come in for a lot of flack in recent times and do you know; they do deserve it
Let’s look at the back catalogue shall we:
Irresponsible lending, leading to a collapse in the financial system
The unreasonable overdraft charges debacle
Failure to pass on B.O.E. rate cuts to customers
Removal of tracker rate products from the mortgage market
………and criticism over shoddy sales practices and price of Mortgage Payment Protection Insurance (MPPI) to their customers.
Well with MPPI you get the chance to vote with your feet!
Over 25% of mortgage payers have Mortgage Payment Protection Insurance; this cover pays your mortgage, at a time when you can’t; for example, involuntary unemployment or inability to work, due to sickness. This cover is a saviour to many at a time when the economy is in tatters and many, many jobs will go.
Now if you have Mortgage Payment Protection insurance; well, good move, you should be sleeping fairly soundly at night.
If you have MPPI and are being ripped off with the bank, would like to change, but are aware that if you do, you could be exposing yourself to the risk of the new policies 90 day initial exclusion period; there is some good news.
Some better quality Mortgage Payment Protection Insurance Policies, will, if you transfer from another insurer, give immediate cover, avoiding the initial exclusion issue.
Not all Mortgage Payment protection Policies, offer this facility, so it is very important to read the policy booklet carefully.
As always, best shop on the internet in a nice free non pressure environment.
What is Mortgage Payment Protection Insurance? (MPPI)
Mortgage Payment Protection Insurance or MPPI for short is a product designed to pay your monthly mortgage repayment, if you are unable to do so. It is an insurance product designed to keep the roof over your head, during a period when your earned income ceases, due to accident, sickness or redundancy.
An illness or redundancy can strike at any time and without warning. By having an MPPI policy in place you have increased peace of mind that should the worst happen you have some breathing space to get things back on track.
A typical MPPI policy will pay up to twelve months mortgage payments in the event of a valid claim, some with no deferred period, therefore offering you “back to day one cover”. Not all mortgage payment protection insurance policies offer back to day one day one cover so if this aspect is important to you then check the policy before buying. With back to day one cover you will generally need to be off work for 30 days, after this the insurance company will back date your initial payment to the first day of the claim. After this payments will be made monthly in arrears.
The mortgage insurance policy will pay, for up to 12 months or your earlier return to work; whichever is sooner. Some Mortgage Payment Protection policies will not only cover your monthly mortgage costs, but give you an extra percentage towards other household costs, for instance like life insurance or other mortgage related insurances.
The level of cover you can choose under these policies differs from each provider. Most will allow £1500 per month with some going as high as £3,000 per month. This figure includes the actual mortgage payment and any additional insurance policy premiums you want to protect against accident, sickness or unemployment.
It is estimated that 24% of mortgage payers have Mortgage Payment Protection Insurance, unfortunately sold heavily through their mortgage lenders. The lenders find these products an easy “bolt on” to the mortgage sale; well who wouldn’t purchase a product that good from a Bank or Building Society? Well if you are smart, you would not. The lenders like to sell these heavily commission loaded, generally inferior products at the point of sale, at a time when your mind is on other things.
People forget the golden rule; spend time shopping around before buying.
It gets worse though; the lenders get to make a packet from you on the sale of an overpriced the MPPI policy, whilst simultaneously reducing their exposure to risk. Why? They are involved in a clever cost containment exercise by selling you a policy to make sure that you do not go into arrears with them! Brilliant idea.
Don’t fall for it; get on the internet, and pick up a quality Mortgage Payment Protection Insurance for a good price from a respectable provider. There are some excellent MPPI policies to choose from with some having received a 5 star rating from Defaqto, this means they provide excellent cover at competitive costs.
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.
When Can Cheap Mortgage Protection Insurance Protect You?
Cheap mortgage protection insurance is underestimated by the vast majority of people, despite the major impact it can have on individual homeowners’ lives. Many individuals who are set on purchasing home insurance to protect their belongings often fail to protect their home itself with cheap mortgage protection insurance.
As with every insurance policy, there are exclusions associated with the cheap mortgage protection insurance out there. Firstly, most providers understandably do not cover an individual homeowner if he or she should lose a job as a result of their own actions, nor if they tale voluntary redundancy. They will ask for information on redundancy claims and may not pay out if an individual was fired instead. However, involuntary redundancy is covered under cheap mortgage protection insurance policies if you have selected that option within your cover.
More and more companies are going out of business every year as a result of many industrial factors. It may be that a business relocates or that it is no longer making a profit. There are a variety of reasons why a business would make its workers redundant, and cheap mortgage protection insurance can help to soften the blow by covering any mortgage repayments and associated costs such as home insurance, typically for up to twelve months, but in some cases, up to 24 months’.
Individual cheap mortgage protection insurance policies may have waiting times attached to the terms and conditions. For example, some stipulate that a homeowner would have to wait for a calendar month before claiming. There are very few cheap mortgage protection insurance policies that come into force straight away. However, despite this exclusion, cheap mortgage protection insurance can most definitely come in useful in either of the situations above and should be considered as a solution to protecting an individual’s financial future.
Simon Burgess is Managing Director of the award-winning British Insurance, a specialist provider of cheap mortgage protection insurance, income protection insurance and loan protection insurance.
Alternatives to mortgage insurance protection
If you are taking out a mortgage for the first time, your lender may try to push you into taking out mortgage protection insurance at the same time. Be careful. It benefits them as they receive a commission but that doesn’t mean it’s the best thing for you.
If you feel the need for some sort of cover, take advice as to what your options are. You may find other products that are of more benefit to you.
• Permanent health insurance. This is sometimes called “income protection insurance”. This type of policy is designed to pay out if you are unable to work through sickness or accident – not usually through unemployment although some policies do include this. It is more useful than mortgage protection insurance if you are self-employed, but isn’t worthwhile if your employer has very good sick pay arrangements in place. If you are interested in looking at this type of cover, look for fixed premiums – premiums that stay the same throughout the life of the policy. You can also reduce your premium payments by agreeing to a delayed payout of 30 or 60 days. Take care that you are aware of what the exclusions are – they could include HIV/AIDS-related conditions, self-inflicted injuries or illness arising from misuse of alcohol or drugs.
• Critical illness insurance. This is a policy designed to pay out a tax-free lump sum if you are diagnosed with any one of a specified list of medical conditions. Choose your policy very carefully – there have been many complaints about insurers finding excuses to avoid paying out on this type of policy. It’s essential to read the small print, even if you need a microscope to do so!
• Life insurance. This may be a possible alternative to mortgage protection insurance, either on its own or in conjunction with one of the others. It is designed to protect your dependants in the event of your death, including paying off the remainder of the mortgage.
• Self-insurance. Some people prefer to save up a sum representing six or 12 mortgage payments in a separate bank account, instead of taking out mortgage protection insurance. The advantage of this is that it can accrue interest, and if illness or redundancy doesn’t arise, the money will still be there for something else! However, you need a lot of self-discipline to leave it alone if you find yourself in urgent need of cash for any reason.
The important thing is that you choose the plan that is right for you, whether it’s mortgage protection insurance (MPPI) or something else, rather than letting yourself be bounced into buying an unsuitable product. If you’re uncertain what to do, find an independent broker or financial adviser who will give you unbiased advice.
