Mortgage Payment Protection Insurance The Do's And Don'ts

Understanding Mortgage Payment Protection Insurance (MPPI)

When taking out a mortgage, you're committing to long-term monthly payments, often for many years. This commitment comes with inherent risks, especially since life circumstances can change unexpectedly. Mortgage Payment Protection Insurance (MPPI) helps mitigate these risks by ensuring that your mortgage payments continue if you're unable to work due to accident, sickness, or unemployment. Here’s a comprehensive guide to MPPI and how to make an informed decision:

What is MPPI?

MPPI is designed to cover your mortgage repayments if you face financial hardship due to unexpected events. It can cover:

• Accidents

• Sickness

• Unemployment

Why Consider MPPI?

• Protects Against Repossession: Helps prevent home repossession by covering mortgage payments during difficult times.

• Financial Security: Offers peace of mind by ensuring you won’t fall behind on mortgage payments due to unforeseen circumstances.

How MPPI Works

1. Coverage Amount: Typically, MPPI covers the amount of your mortgage repayment, plus additional costs if you have other insurance policies related to your mortgage.

2. Tax-Free Payouts: If you need to make a claim, the income received is generally tax-free.

Top Tips for Buying MPPI

1. Timing: You can purchase MPPI at any time, not just when you arrange your mortgage.

2. Shop Around: Don’t feel pressured to take MPPI from your mortgage lender. Use the internet to compare quotes and potentially save up to 60% on premiums.

3. Comprehensive Coverage: Ensure your MPPI covers not just the mortgage repayment but also life insurance, home & contents insurance, and any investment plans related to your mortgage.

4. Exclusions: Understand the exclusions of the policy, such as seasonal or casual employment, which might disqualify you from making a claim.

5. Policy Terms: Compare policies carefully, focusing on the conditions under which payouts are made. Premiums often reflect the level of cover and exclusions.

6. Different Names: MPPI can also be referred to as Accident Sickness and Unemployment Insurance, Payment Cover, or Payment Care. Ensure you understand what each policy covers.

7. Waiting Period: Most policies have a waiting period before you can claim. Check if the policy has a 30-day or 60-day waiting period and whether it will backdate payments.

8. Avoid Confusion with MIG: Mortgage Indemnity Insurance (MIG) covers lenders against losses if a property is sold for less than the loan amount, not for individual borrowers.

9. Check Existing Coverage: If you already have Permanent Health Insurance (PHI), review its terms to determine if MPPI is necessary. Similarly, compare MPPI with Critical Illness Insurance to avoid overlap.

10. Online Shopping: The internet is often the best place to find and compare MPPI policies. Search specifically for “mortgage payment protection insurance” to find relevant options.

Summary

MPPI can be a valuable safety net for protecting your home and financial stability. By understanding your options, comparing policies, and considering your specific needs, you can make an informed choice that provides the protection you need without overspending.