Is it possible to insure protection for my mortgage repayments?

When many people take out a home loan they don't think about mortgage payment protection insurance (MPPI). The government shook-up the market by firstly stopping financial assistance for those with a mortgage who become unemployed, meaning they won't provide benefit for the first nine months. They then set minimum standards for policies to make sure that customers got a fair deal.

The reason most people don't think about MPPI is that they hope their savings or state benefits should they not be able to work. However, for most borrowers, their savings are not enough, and will not cover them for an indefinite period. Furthermore, a man with two children will only get at most £6883 a year of state benefits if out of work. So you can see that your mortgage payments are not likely to be adequately met without some sort of protection should you not be able to work.

MPPI, whilst not compulsory, is sometimes a condition of some loans. However, it should be considered by anyone taking out a mortgage. In this day and age of rising house prices and income multiples allowed by lenders, many people stretch themselves financially with their mortgage. What happens if they suffer from unforeseen unemployment?

State benefits are means tested, so if you have savings they won't be paid, and even then you have to wait nine months. This is where an insurance policy that covers mortgage related bills can be vital.

Good MPPI policies will kick in a month after you're out of work, through redundancy or illness. These policies pay out for a period of about 12 months, as by the end of that period you should have found new work or recovered from any illness. Should you have a long term illness, you should be covered by permanent health insurance, rather than MPPI. It's a short-term product, and this is usded to cut down on the cost of claims and keep premiums down.

Once you are out of work, tell your insurance provider, who will verify that you are truly unemployed, and after a month in which you have no income your payments will begin. Usually, payments are direct to your mortgage lender, rather to the customer. This avoids the temptation to use the cash for other things, and also should you need to be means tested for other benefits, the MPPI payments will not be included, which will help you.

As to the cost, you won't find much variation between providers, and rates have been coming down recently. Typically you will pay per £100 of cover each month, and average premiums are about £5.50 per month per £100 of cover. You don't have to buy from your mortgage provider, you would benefit from searching the market.

 

 

 

 

 

 

© AskFinancially.com 2008

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> What does a mortgage protection insurance policy cover?
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> What is the difference between redundancy protection insurance cover and unemployment protection insurance cover?
> What is the difference between a mortgage protection plan and a mortgage protection policy?
> What is the difference between an income protection plan and a income protection policy?
> Is it possible to insure protection for my mortgage repayments?