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When you’ve taken out a mortgage you’ve make a long-term commitment to maintain the monthly repayments for the full duration of the mortgage. That’s going to be over many years but you’re making that commitment without the benefit of a crystal ball – no one knows how your circumstances are going to change, for good or bad. So that must represent a big risk. Mortgage Payment Protection Insurance (MPPI) is one of a range of insurances that includes life insurance and critical illness insurance, which you can reduce that risk and protect your family’s finances.

The purpose of MPPI is to ensure that your mortgage repayments will continue to be paid if you’re off work for an extended period due to accident, sickness or unemployment. Just consider the risks that this type of insurance is designed to alleviate:

Home repossessions run at about 90 per day. Most of these are due to financial problems associated with unemployment.

One third of all people aged between 25 and 34 have experienced unemployment for more than a month.

During the term of their mortgage most people experience at least one period of illness, or the repercussions of an accident, which will keep them off work for more than 3 months.

If you have a standard repayment mortgage, you’re well advised to set the value of monthly MPPI cover to equal the value of your monthly repayment plus your life insurance and home & contents insurance premiums. However, if you have an interest only mortgage, then your cover also needs to include the monthly cost of the investment plan you’re using to repay the mortgage at the end of its term. Also remember that if your mortgage repayments subsequently change due to interest rate movement, then you need to contact your insurer and get the policy similarly modified. Oh yes, the nice bit – if you claim then the income payout is totally tax-free!

11 Top Tips for buying

Mortgage Payment Protection Insurance

Don’t think that you can only take out MPPI when you arrange the mortgage. You can take out MPPI at any time.

Be aware that some mortgage lenders will try to pressurise you into taking out MPPI along with your mortgage. If this happens, make sure you find out how much extra the cover will cost each month and then get on the Internet and get a few competitive quotes. Most people will find savings of up to 60%!

Mortgage lenders will only quote you for the cover needed to meet your monthly mortgage repayments. Remember our advice to include cover for the cost of your mortgage life insurance, your home & contents insurance and the cost of any investment plan you have allocated to repay your mortgage (the latter item applies only to interest only mortgages).

If your employment is seasonal or casual you won’t be able to claim on an MPPI policy. Every policy has what are called exclusions and seasonal and casual work is just a typical one. Exclusions are the circumstances under which you cannot make a claim. Always read these exclusions before you take out the policy and if you can see that your circumstances mean that you’re unlikely to be able to make a valid claim, don’t buy the policy. In some cases, the policy exclusions will eliminate 50% of potential claims.

Don’t automatically opt for the cheapest MPPI policy. The conditions under which policies pay out do vary so check them out carefully. Premiums are always a reflection of the extent of the exclusions in the policy, the level of cover provided and the insurers general marketing strategy.

Don’t get confused by the different names given to MPPI. It can also be described as Accident Sickness and Unemployment Insurance, Payment Cover and Payment Care. Basically, they all do the same – but remember to check out the exclusions!

Most policies state that you have to be off work for a minimum period of time before you can make a claim. The maximum period you’ll find is 60 days but many policies reduce this to 30 days – and some will then backdate the payment to the first day you were off work. You’ll find full details about these aspects in the policy’s Terms and Conditions. Always check these out before you buy and remember when you’re comparing prices, to compare like with like.

Don’t confuse MPPI with Mortgage Indemnity Insurance (MIG). Mortgage Indemnity Insurance p rovides cover for a mortgage lender for any losses the lender might suffer as a result of a property on which they provided a loan being sold for less than the amount of the loan. Any payout under a MIG policy goes to the lender, not you!

If you already have Permanent Health Insurance your may not need MPPI. Check out the terms of you PHI policy.

Be aware that there is a level of duplication between Critical Illness Insurance and MPPI. MPPI will pay you an income during the insured period for any illness that prevents you from working. Critical illness Insurance will payout a lump sum if you are diagnosed with any of the chronic illnesses listed on the critical illness policy. So if you have a critical illness claim, then you will almost certainly also have a claim on your MPPI policy. However, if the illness that’s keeping you off work is not listed on the chronic list, and all ordinary illness aren’t, then only your MPPI policy will payout.

Shop around. As with most types of insurance, the Internet is the cheapest place to shop and many sites will enable you to arrange cover immediately online. Try searching under mortgage payment protection insurance rather than just mortgage protection. That search term is totally specific and you’re bound to find what you want.

Hopefully you found this article helpful, it was provided by JVM Lending, the leader in CA Home Loan and CA Mortgage loans.

PPI, or payment protection insurance, has been causing a whirlwind of problems for UK residents ever since the investigation in 2005, which followed up on a super complaint regarding mis-sold policies. The investigation was commenced by the Financial Services Authority and it was soon deemed that any person who had purchased payment protection insurance were not getting what they were paying for.

There are many reasons that a person may have grounds for filing a valid payment complaint. A myriad of people were sold policies when they were self-employed, retired, unemployed or had medical problems that might keep them from finding future work. Anyone who was sold a policy under these circumstances will be able to file a payment protection complaint that will be successful. Several large companies have already been fined a great deal due to mis-selling policies in this way to their customers.

Insurance companies were eager to sell these policies and have their insurance agents lead the customers to believe that they have to take out a PPI in order to obtain a loan. A majority of PPI policies that were sold were not properly explained, in detail to the customer. Many important terms and conditions were not explained by some insurance agents as to make the policies more marketable to people. If any of this sounds like your situation, you may want to start filing your own payment protection complaint with your insurance company.

There are many other grounds for compensation on these PPI policies. Those who were under eighteen, over sixty-five, employed on a temporary contract basis, worked less than sixteen hours a week, suffered from backache, aware that you may be laid off, had an existing illness or if you were not told that the policy could be less expensive elsewhere, you have strong grounds for filing your own payment protection complaint. Also, if the insurance agent did not ask you if you are insured by any other companies, you will also have grounds to file a complaint. Filing a complaint can be as easy as visiting the world wide web to fill out a Loan Insurance Complaint form.