Beginner's Guide To: Mortgage Payment Protection

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The Independent Online

With unemployment still on the rise, there has never been a more important time to make sure that your mortgage is protected. This week we look at mortgage payment protection insurance.

What is it?

Mortgage payment protection insurance (MPPI) helps with the cost of your mortgage payments should you lose your job or find yourself unable to work due to sickness or injury.

There are different levels of cover: you can be covered for just accident and sickness, just unemployment, or for full accident, sickness and unemployment. Premiums will differ depending on the level and amount of cover, and the length of the term. Policies often pay out for a year after you lose your job, sometimes two.

Are there any catches?

As with most policies of this nature there is an excess period so payouts won't kick in straight away. The duration is variable – you can often choose from 30, 60, 90 or even 120 days.

Opting for a longer excess period will help bring your premiums down, but you'll need to cover your mortgage payments in the meantime. So, if you don't have much in savings, it may be worth paying more for a policy that kicks in sooner. Conversely, if you have a fair amount in savings you may decide this cover is not worth paying for.

Another point to check is how your provider views scenarios such as redundancy. Most insurers will not cover those who are already under notice of redundancy and others will not cover you if you are put at risk within a certain timeframe of your policy coming into effect.

Finally, because of the economic climate, some insurers have stopped offering this element of protection because the likelihood of someone having to make a claim has increased significantly. If the reason you are considering MPPI is because of job insecurity, make sure that you are insured for this before buying a policy.

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