You may ask why you need mortgage protection insurance, believing that it is just another expense when your money is stretched already. However, have you considered what would happen if you were to suddenly lose your income due to involuntary redundancy or incapacity such as from having an accident or falling sick? How would you service your monthly mortgage debt? Even missing just a few payments will send you in to arrears which could see you in Court facing repossession. It really doesn’t bear thinking about.
You may also believe that the State will help you out with meeting your mortgage commitments. But currently, to benefit from State help, you need to meet strict eligibility criteria. For example, you would be ineligible to claim for State benefits if you had savings over a certain amount. And even if you were eligible to claim for State assistance, the amount you would receive would be very little and in most cases not enough to cover your mortgage repayment. There would also be a waiting period before you could make a claim, meaning you could fall in to arrears at this time.
With mortgage payment protection insurance – also known as MPPI for short – you will still be able to maintain your mortgage repayments even when you are off sick or involuntarily unemployed. The mortgage protection insurance policy will start to pay you a fixed tax free sum every month that you are unable to work or without unemployment for up to 24 months (though some policies just run for twelve months, so do check out the policy features and benefits when buying your cover to ensure you have the right level for your needs). Of course, if you recover or find alternative employment within this time, then the benefit will cease.
You will be able to claim the benefit anywhere from thirty to ninety days after you first become unemployed or incapacitated, subject to the individual policy terms and conditions. Some policies will offer cover that is back dated to the first day of your claim, so that you can take full advantage of the insurance. This is sometimes known as ‘back to day one cover’, so look out for this policy feature when choosing your mortgage payment protection insurance policy.
How much benefit you will receive will have been agreed at the time of taking out the mortgage protection insurance and could also include mortgage associated costs such as life, home and critical illness cover as well as utility bills. Each provider will have their limits as to how much cover you can take out, so, again, check this before you sign up to the policy.
Finally, shop around for your mortgage protection insurance to get the best price on your cover. Traditionally, the high street banks and lenders have been known to sell overpriced cover whereas the independent brokers can often offer substantial savings on the protection, meaning you can get the insurance and peace of mind you need at a price that suits your budget.
