Mortgage Protection Insurance
If you are a home owner, being unable to make your monthly mortgage payments would be your worst nightmare, as this could potentially mean losing the roof your head. If you want to keep your mortgage repayments safe in the unfortunate circumstance that you are unable to work, Mortgage Payment Protection Insurance (MPPI) might be something to consider. In the event of accident, sickness or unemployment stopping you from working, Mortgage payment protection aims to cover your mortgage payments if you are unable too.
Do I need cover?
In some circumstances, you may be able to obtain aid from the government if you run into trouble and are unable to make your mortgage payments, however, not everyone will necessarily be eligible for this. Moreover, even if you do qualify for help, it will usually only cover the cost of the interest on your mortgage and not the repayment costs. By using MPPI you are covered for both the interest rate and the actual repayment cost.
Should you find yourself in a situation where you are unable to make your mortgage repayments, be mindful that most MPPI policies will usually only pay out for a maximum of one year, so if you have sufficient savings set aside to cover your mortgage payments for this period, then you may not require cover.
If you are a new employee at your company, it is worth noting that most MPPI policies won’t usually allow claims for unemployment within the first three to six months of employment. However, if you have worked at your company for several years, it is worth asking your employer how much they are likely to pay you should you get made redundant, as chances are you may get a significant payout, meaning you could be paying for the unemployment element of your mortgage payment protection policy unnecessarily. If this is the case, you may be better off going for accident and sickness MPPI cover only.
In addition, you should also consider the amount of sick pay you might be entitled to from your employer if you fall ill and are unable to work. If a decent amount is offered, then it might be worth opting for unemployment cover only.
MPPI policies usually start pay outs either 31 days or 60 days after you are unable to work. However, many policies offer ‘back to day one’ plans, meaning that the benefit you receive is backdated to the date when you were first unable to work.
As mentioned previously, generally most polices only pay out for up to 12 months, however, there are some policies which will pay out for as little as three months only. It is also important to note that some policies cap monthly payments, usually at £1,500 or £2,000 a month, so if you have a very large mortgage, you will need to think about how you will cover the additional excess of your repayments.
Other things to consider for Mortgage Protection Insurance
If you find yourself unable to work, it is important to be mindful that your entitlement to some income-related benefits could be jeopardised if you receive a payout from your Mortgage Protection Insurance policy.
When looking for policies, you should also inquire whether the policy pays you directly, or payments are made to your lender.
You should also check that you don’t have any other kind of cover already in place which might protect you in the event you are unable to work, e.g. income protection cover, which guarantees a regular income if you are unable to work under certain circumstances such as illness or a disability, however Income protection won’t pay out in the event that you become unemployed, so if you already have this type of policy, you might also want to consider taking out an unemployment-only mortgage payment protection plan too so that you are fully protected.
Comparing Providers can help!
Many people pay more than they should for Mortgage Protection Insurance, so if you already have a policy in place you should review it when it comes to your policy renewal, and you should check the terms meet your requirements as you could obtain equivalent or better cover for a better price. By comparing the market for a range of MPPI plans from some of the UK’s leading insurance providers, will help you find the right cover to suit you.