Useful Information ( Mortgage Payment Protection Insurance -
MPPI ) :
(Note: The
following information is general guidance, and not specific to
any product provider):
Is more Mortgage
Payment Protection Insurance 'sexy', does it bring a warm
glowing feeling - probably not, it is not on most peoples do
list, granted. But is it of value ?
"Your home may be repossessed if you do not
keep up repayments on your mortgage."
Probabilities
are, you have seen this statement in mortgage illustrations,
websites, and advertising media, but have you considered for one
moment about what it means for you. The home is considered for
most individuals their most valuable asset. Not having Mortgage
Payment Protection Insurance, can impact on you and your family
in financial terms?
The bottom line
is if you and (possibly your partner fail), to meet your
residential mortgage repayments and continue to fall in arrears,
here the danger can be to lose the roof over you and your
families head. But you can take certain measures to protect
yourself against this risky situation by considering the
benefits of 'Mortgage Payment Protection Insurance'
( MPPI ). Also at times called ''MPPI'',
''Accident Sickness & Redundancy'' ( ASU ),
''Accident Sickness and Unemployment'' ( ASU ),
''Payment Protection'', ''Income
Protection'', ''Sickness & Disability Insurance'',
''Unemployment & Redundancy insurance'',
''Payment Protection Insurance'' ( PPI ).
What’s MPPI or ASU ?
Mortgage
insurance can provide income protection for
accident, sickness and involuntary redundancy,
normally for a period of 12 to 24 months, which is paid tax free
to protect your mortgage or rental cover, each policy from an
insurer can vary and policy terms and conditions that apply are
key and need to be evaluated. That in the event of a claim, you
know that you are to be paid out and the policy meets your needs
and circumstances, and particularly being aware of any
exclusions. It’s simple no point having insurance, if you are
not to be paid upon a claim.
Mortgage Payment Protection Insurance or Accident Sickness & Disability is cover to make repayments on
your mortgage (and other associated house-hold expenditure for
example building's & contents insurance, Life Insurance, MPPI
cover etc), in the event of sickness or involuntary redundancy.
The policy is made of two separate insurance covers
''Accident and Sickness insurance'' and 'involuntary 'Redundancy Insurance'' (or at times called ''Unemployment
cover''), and cover can be for one or both
components.
''Often
individuals are under the misapprehension that the government,
will meet any mortgage payments in the event of accident,
sickness and redundancy and loss of income, and be their saviour
in times of difficulty. Yes as you need to meet strict DWP
criteria to be paid state support:.
If you do get
into difficulties talk to your lender if you cannot meet your
mortgage payments – they will have a set procedure for dealing
with your case and have duty of care. State benefits – may be
available but may cover you only after an initial waiting
period; for example:
-
you won’t
qualify if you have a joint mortgage and only one of you
loses your income.
-
you won’t
qualify if you have savings of more than £8,000.
-
you may only
qualify for help nine months after you become unemployed
(unless you took your mortgage out before October 1995).
-
payments will
only cover the ‘interest’ part of the mortgage; and
-
there is a
limit on the amount of mortgage that qualifies i.e. up to
£100,000.
How to choose an MPPI / ASU COVER ?
As a short term
insurance cover 12-24 months, ''Permanent health
Insurance'' - PHI- (or times known as ''Income
protection'') is also a option which although as a rule
is more expensive due to the comprehensive nature of the policy
and being fully under-written and can cover till the age of 65
years. Whilst for ''MPPI ' age, life style,
smoking is largely not taken into account by bulk of the
insurers, whilst with ''PHI'' smoking,
health and life style will effect the premiums. There is a
possibility of combining both MPPI and PHI,
to get a more robust and comprehensive cover (call 0870 0116928
for guidance).
Policies on the
market vary, some questions you should raise in evaluating a
policy are: Exclusions ?/ Excess periods ? / Definition of
Redundancy ?/ Pre-existing medical conditions ?/ Maximum cover
determined upon your income ?/ Previous claims history ?/
Pre-existing Medical Conditions ? / Clear and Concise Documents
? / Definition of being self employed ?/ Will you receive
Redundancy pay out ? / Have you got savings, and how much ? /
Have you got an alternative policy i.e. Permanent Health
Insurance ? / Are you a public sector worker, what are your
employer benefits for sick pay ?
Office of Fair Trading’s report ' Payment
Protection Insurance February 2007' has high lighted certain
practices mainly from Banks and Building Societies that do
not reflect a benefit to consumers, and makes interesting
reading :
‘’The distribution of
(Payment Protection Insurance) PPI
policies to consumers is largely controlled by the lenders,
principal among which are the high-street retail banks and
building societies, which together account for approximately
80 percent of all PPI policies sold. Their
extensive branch networks and position as leading credit
providers give them unique access to consumers, which is a
key feature of PPI distribution. Conduct of
firms adversely affecting competition
Competition is centred on the sale of the credit and not
the PPI. -
PPI is often automatically included in the quote
for credit without a customer's knowledge.
-
Consumers in some cases either assume or are told or
given the impression by the distributor that taking out
the PPI will help the application for
credit.
-
Headline APR is used to draw consumers into the credit
deal - but the APR for the credit is not necessarily a
good indicator of the best deal once the PPI
gets factored in.
-
There is poor upfront information, making it difficult
for consumers to weigh up whether they will get a good
deal
-
Firms' practices in giving refunds do not reflect cost
or consumer risk profile on cancellation of single
premium PPI
-
We interpret 'stand alone' as policies which are sold at
a different time to the core credit transaction and by
an organisation other than the lender involved in the
core credit transaction i.e. are not sold as a 'linked'
product to the credit.
-
Although the FSA's rules require firms to provide
consumers with information about PPI in
good time before the sale is concluded.
-
Payment Protection Insurance February 2007.
Conduct of consumers
adversely affecting competition:
-
Consumers do not
shop around for the best deal on PPI. A contributing
factor to this is the huge POS [Point of Sale] advantage
enjoyed by distributors.
-
Consumers display
poor understanding of PPI, its price and the detail of
their cover, with suppliers initially doing little to
remedy this situation.
With the advent
of the credit crunch in late 2007 and repossessions on the
increase, and slowing down of the economy, and the governments
challenge to curtail inflation has created a greater need in
these times of uncertainty, where individuals should be paying
attention to mitigate mortgage payment risk on their residential
homes. Often the negative impression that MPPI is
too expensive, or Mortgage Payment Cover does not pay
out, is complicated, scepticism MPPI has little value
cannot be healthy in financial terms. As the real value will
really be realised of such protection insurance, at point of
claim and MPPI’s inherent benefits. A suitable and
comprehensive policy can only empower individuals to protect
their best interests, and giving an element of peace of mind.
Don’t be fooled,
there is absolutely no legal requirement to have Accident
Sickness & Redundancy insurance cover, when getting a
mortgage or re-mortgage and is not a condition of the loan,
don't be pressured into buying MPPI from your bank or
building society at largely inflated premiums. Often main stream
banks have staff on incentive and target driven campaigns to
sell Mortgage Insurance. Suitability to individuals needs
and the high premiums have raised concerns if consumers are
being treated fairly, and where policies are not as
comprehensive by providers not readily available to consumers
from the high street banks, the internet has great potential to
serve you if used wisely.
New insurance
rules allow you 30 days to cancel Mortgage Payment Protection Insurance - MPPI - from the original 14 days.
MPPI if
considered and purchased with care has clear benefits, to
protect and relieve you from anxiety and stress in the event of
personal financial difficulty in the loss of your income...the
government is keen to encourage Mortgage Payment Cover
uptake….if you lost your income for the next 12 months to 24
months how would you meet your mortgage payments ?
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