At mortgagecase.com we are often asked about Mortgage Payment Protection Insurance. This series of frequently asked questions aims to educate the borrower about the complexities of the mortgage payment protection insurance market.
The borrower, or more properly, the commitment to repay the borrower’s mortgage loan is protected by the policy. Borrowers that are made redundant, have an accident, or fall ill are provided with insurance to repay their mortgage.
In most cases, policies will pay the mortgage loan for up to 12 months if the borrower cannot work due to health or involuntary unemployment.
The cost of MPPI policies depends entirely on where the borrower buys the policy from. Competitive specialist mortgage payment protection insurance providers may provide better value for money.
Age-related mortgage payment protection insurance are good news for first-time buyers, because they are usually cheaper for young people. Borrowers have their premiums calculated based on age and level of cover.
Not in some cases, although this does depend on the insurance provider. Young people benefit from age-related MPPI because they are less likely to develop serious health problems, and are more employable should they become redundant.
No, age-related mortgage payment protection insurance is not suitable for everyone, particularly those who have medical conditions on an exclusion list. Like any insurance policy linked to health, policyholders must be open and thorough in disclosing their medical history. MPPI does not cover those who take voluntary redundancy.
Major exclusions, which everyone looking to take out MPPI should bear in mind, include: Alcohol and drug abuse, involuntary unemployment if claimant was not in continuous employment for six months, involuntary unemployment due to misconduct.
Common reasons for not choosing Mortgage payment protection insurance include financial security of self, spouse of family. Furthermore, some people choose income protection insurance as a product, although this does not cover for involuntary unemployment. Some employees are entitled to sick pay over an extended period.
For some people who have very little sickness cover at work, some aid is provided. However, the criteria make it hard to qualify.
Confusingly, mortgage payment protection insurance is sometimes called accident, sickness or unemployment cover, or payment protection insurance. MPPI is also known as mortgage protection insurance.
Although specifically attached to a mortgage, MPPI can also be designed to cover interest repayment on mortgage-related outgoings, including home insurance.
There is normally a waiting period between claim and payment, between 30 and 60 days.
Depending on your situation, you will need to establish the validity of your claim. For instance, in case of redundancy you will need a redundancy notice. For illness or injury your doctor may need to verify your claim.
First, complain to the lender who sold you the policy. If not satisfied, consider involving the Financial Ombudsman.
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