Mortgage Protection Insurance UK

Do you feel secure in your job now? Has your MD recently gone public in the media with a promise that there will be no redundancies at your company (usually means the same as a vote of confidence for a football club manager from their chairman)? Is there a general feeling of impending doom hanging around your company? Actually, is there a general feeling of impending euphoria hanging around your company (a sure sign something bad is about to happen)?

With the UK economy growth slowing seemingly every year the only industry in which workers can feel secure is probably the defence industry, who will likely have jobs for a long while now. You only have to look at the past year, when companies as large and supposedly stable as Reuters, Land Rover and Royal London all announced sweeping job cuts.

With this very modern sword of Damocles hanging over so many people's heads, it shouldn't come as a surprise that many people are thinking about protecting themselves with mortgage payment protection insurance. This is not the same as accident, sickness and unemployment cover (ASU), which covers you for the same events, but is specifically to cover a financial product payment.

Recent figures released by the Council of Mortgage Lenders (CML) found that the number of mortgage loans covered by MPPI has risen from 16% in 1999 to about 22% now. This is well below what the CML believes to be a sensible target, which is 55%.

Those that are taking out MPPI are also in general not taking time out to shop around for the best value policy. Homeowners seem to be taking cover from their mortgage provider without going to independent insurance brokers to find the best deal. These people can end up being charged thousands of pounds more than they would be if they took out the cheapest policy for their needs.

When you take out MPPI, you are asked to pay a certain amount per £100 of cover. So, if your mortgage payment is £1000 a month, and you are being charged £5 per £100 of cover, then you will need to pay £50 a month, which is £600 a year for protection. Should you take out a policy for £7 per £100 of cover, then you have to pay £70 a month, which is £840 a year, so you can see over the term of a mortgage (an average of 25 years) that the total difference would add up to over £6000.

Of course, you shouldn't just assess MPPI policies for price. What they cover is also important. Check the policy details when comparing policies to check the amount and length of benefits for instance.

 

 

 

 

 

 

 

© AskFinancially.com 2008

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