Many mortgage holders do not consider the financial consequences of finding themselves in a situation where they were unable to make their mortgage repayments. Mortgage Protection, or Mortgage Payment Protection Insurance, (MPPI) is the insurance that you take out with your mortgage. It will cover your mortgage if are in an accident, become unemployed, or suddenly become ill and unable to work.
Choosing a Policy
Most MMPIs are bought with a mortgage. There are no pre-conditions attached with an MMPI. That is, you won’t be evaluated by your age, health, or occupation. It basically depends on the cheapest policy that accommodates your needs. However, there may be a rare lender out there that might charge you based on your age so make sure the lender you choose does not charge you.
There are many different types of protection plans. The following is a list of the major plans:
a) Mortgage life assurance – In the event of death, it guarantees that all outstanding repayments will be fully paid off.
b) Term life insurance - Covers the holder for a set period of time.
c) Mortgage payment protection - Covers disability and unemployment for a set number of days
d) Accident, sickness, unemployment cover – Much like payment protection except it provides specific accident and sickness coverage
e) Buildings and contents insurance - Protects the property against damage or theft.
f) Income protection - Helps holders maintain a monthly income in the event of accidental injury of sickness
It is estimated that only about sixty per cent of new mortgage borrowers take out an MPPI. Some borrowers may consider the coverage expensive. Many lenders charge around £5 per £100 of mortgage payment that you choose to insure each month. If you shop around, you may be able to find cheaper MPPI. Some mortgage deals come with free MPPI, either for six months or a year. If you remortgage at any point and increase the size of your mortgage, you will also need to increase the level of MPPI coverage.
You can take out Mortgage Payment Protection Insurance over the internet, although some financial advisers can offer cheaper insurance because they arrange insurance bulk-buying. You must remember to renew the policy or take out another one at the end of the free period.
A mortgage is probably the biggest financial commitment you will make. It is important to protect your mortgages to ensure that payments can be met even if your financial situation changes. When switching policies, some policies states that you can’t claim within a set time period after switching. If you have a preexisting medical condition, check to see if the policy will cover you. If you are self employed, you can take insurance out just for accident and sickness to cut your costs.
Don't let your biggest commitment go unprotected. Consider it as an investment in peace of mind. You can relax knowing that your family will never lose their home, even if the worst happens.
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