Mortgage Payment Protection: Is it the best thing for you and your family?
After all the concern (and to a certain extent, scandal) regarding payment protection insurance for credit cards and loans, people are naturally wary of the term, especially when it comes to a major financial obligation like a mortgage. However, when it comes to keeping a roof over your head, ensuring your mortgage repayments are met on time is paramount. And if the worst happens (such as a debilitating accident, the death of the main income provider, illness or redundancy), then debts can very quickly mount up, putting your home at risk. In that instance, mortgage payment protection insurance (or MPPI) is an essential.
If you’re looking for comprehensive mortgage payment protection insurance or any other kind of personal insurance, call us and talk to one of our friendly advisers.
How does MPPI work?
Put simply, a mortgage payment protection insurance policy guarantees that your mortgage repayments will be met for between 12 and 24 months (depending on the policy), should you fall ill, have an accident or lose your job. You pay a monthly premium (in exactly the same way as you would with any other form of insurance policy), and in the event of an accident, illness or redundancy your insurer will meet your monthly mortgage payments for a set period of time. This means you can focus on recovering or finding a new job, without having to worry about falling behind on your mortgage repayments and ultimately putting your home at risk.
Those other monthly bills
MPPI can also include additional cover for other monthly bills such as utilities or council tax. The amount of cover you get depends on your policy, how much insurance you want to take out, and the cost of your monthly premiums.
However, don’t think that an MPPI will cover everything. You won’t be receiving the same amount of money every month as you would if you were working, so you’ll still have certain financial shortfalls that will need to be covered. Most MPPI providers let you have a maximum benefit of between £1,500 and £3,000, so that could be as much as up to 75% of your salary (gross monthly amount), and up to as much as 150% of your monthly mortgage costs, giving you a little bit extra to cover bills such as council tax.
If you change mortgages, though, be aware that you may not be able to ‘carry over’ your MPPI policy to the new mortgage, and so you may have to contact your insurance provider to arrange new cover.
What doesn’t it cover?
MPPI is medically underwritten, which means expect plenty of health questions when you sign up. You’ll need to disclose any existing or underlying health issues, and there’ll also probably be questions on lifestyle (whether you’re a smoker etc.) that will determine exactly what you are covered for. Obviously, nobody can predict an accident or redundancy in advance, but health issues are a different matter. If you have long-term serious medical conditions you may find it harder to get MPPI cover.
You also may need to wait a while before your MPPI policy ‘kicks in’. This waiting period is the difference in time between when you initiate a claim and when the insurer starts paying out. Waiting times are also often referred to as an ‘excess period’ or ‘deferral period’, and can be from 30 – 180 days. The longer the excess period, the cheaper the policy.
There are some MPPI policies available known as ‘back-to-day-one’ policies that pay out immediately but expect to pay a much higher premium for these as compared to policies with an excess period.
Other compatible insurance cover
While MPPI is a good idea if you have a mortgage, there are also other types of insurance available that can ensure you don’t start to run up large amounts of debt if you’re taken ill or lose your job. Another type of cover that can give you real peace of mind is known as Income Protection Insurance. This effectively guarantees you at least some kind of income if you are off work due to illness, an accident or even redundancy.
PPI has a bad reputation, but if used correctly it’s actually a very useful form of insurance that will guarantee things such as loan repayments and credit card bills are covered, even if your usual form of income is interrupted. Private medical insurance is also useful if you encounter long-term health issues that require expensive treatment.
A complete protection package
The trick when buying protection insurance such as mortgage payment protection insurance, private health insurance, income protection or even the dreaded PPI, is to package them together into a comprehensive group that gives you and your family absolute peace of mind. Remember, this kind of insurance doesn’t just benefit you, but can also protect your family as well, especially if you’re the primary income provider in the home.
Obviously, you won’t always need everything, and if you want to you can pick and choose what type of payment protection insurance you take out. With so many different policies now available, you’re bound to find one that suits your specific circumstances. Policies take into account everything from your age, your income and your occupation to the location of your home, the cost of your mortgage repayments and what type of mortgage you have. So for example, if you have a fixed rate mortgage you may find that your MPPI costs are less than if your mortgage is a variable rate one.
Get professional advice
With such an important decision as protecting your home, your family and your income, it’s crucial to get professional advice so you can make a considered and informed decision. At Park Insurance, we have over 20 years’ experience in providing our clients with the best in personal insurance that provides complete protection and peace of mind.
If you’re looking for comprehensive mortgage payment protection insurance or any other kind of personal insurance, call us and talk to one of our friendly advisers for confidential, no-nonsense advice.
Make sure your finances are covered with the right insurance, and you can rest easy that everything, including the roof over your head, is protected.