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Mortgage payment protection insurance or MPPI is an insurance policy that covers your mortgage payments in case of unemployment, illness, or accident.  Depending on the terms and conditions of the policy, mortgage payments insurance will typically pay out the equivalent of your monthly mortgage payment one month after your income stops due to sickness, accident, or redundancy.  There are policies that pay only the equivalent of the principal and interest payments and there are policies that include payments to cover the taxes and insurance. One month is the minimum deferral period of payout from the time that the claim is filed. But there are policies that take longer deferrals, to as much as 90 days or 3 months.  The benefit is usually paid for 12 months or 24 months depending on the policy.  MPPI is also known as ASU or Accident, Sickness and Unemployment Insurance.

Will I get help from the government?

When it comes to mortgage payments, state assistance is of little help. Those who took out a mortgage since October 1995 will have to wait for nine months of disability or unemployment before state assistance for mortgage payments can be provided. Even then, the government will only help out in paying the interest of the mortgage and not the principal. State benefits are very limited and one has to be means tested first to be eligible. This means that you have to use up your savings first to pay for your mortgage before you are qualified to get assistance from the government.  This is the reason why a lot of homeowners are opting to get mortgage payment protection insurance.            

What is the cost of getting MPPI?

MPPI usually costs around £3 to £7 per £100 of your monthly mortgage repayment.  You can get mortgage payment protection quotes from online MPPI specialists who can compare prices and policies available in your area for free.  You can also go to the Financial Services Authority (the government body governing MPPI in the UK) website to compare different types of policies and check out what is the average rate in your area.

Do I need to get an MPPI to take out a mortgage?     

Getting MPPI is optional and you don’t have to buy it from your lender unless it is part of the terms and condition of your mortgage.  Usually, if you can pay at least 20% down payment, then you don’t have to get mortgage payment protection insurance.  This type of insurance is usually mandatory in cases where the home buyer puts a down payment that is less than 20%. In this case, MPPI will protect the lender in case that the buyer is not able to meet the monthly dues. Usually, the mortgage lender will require the borrower to get an MPPI or PMI (private mortgage insurance). This type of insurance will pay for the mortgage in case of default and foreclosure and protect the lender from possible losses when selling the property.

Are all homeowners eligible for MPPI?

 Not all homeowners or borrowers will be able to get cover from MPPI.  Those who are permanently employed with one company for at least six months are eligible. Those who are self-employed, work part-time, on a short-term contract, and are over 60 are typically not eligible.  Those who are over 60 may want to look into life insurance and mortgages.  

 
Will MPPI cover my mortgage as soon as my income stops?

If you become ill or lose your job and your income stops, you will have to file a claim and wait for at least a month (depending on the agreed upon deferral period) before you can get any benefit and for the mortgage insurance to cover your monthly mortgage.  After claiming, you will typically have to wait for another month or two before payments can be made by the insurer on your behalf.

How do you claim your MPPI?

Your policy should be able to provide you with the complete details of how you can claim your benefits from your mortgage payment protection insurance.  Included there should be a list of the evidence that you have to provide in order to support your claim of unemployment, illness, or accident.  If you have become redundant and unemployed, for instance, you will have to show the letter of termination from your former employer to the insurance company. If you are claiming because of injury or illness, you will have to supply a medical certificate from your doctor as well as details of your medical condition to get he benefits from your home insurance.  

  
What are the circumstances in which a policy won’t pay out?

MPPI has a lot of restrictions so better read the fine print before you get a policy. According to OFT research, only one in five claims of MPPI are successful.  Some of the reasons why insurance companies will not pay out are when the individual knew that he or she was going to be made redundant before getting the policy or when the company the person worked for recently experienced job losses.  The insurance company will also usually not pay out if you were fired because of misconduct or negligence (in other words, if the reason for your unemployment is your fault), or if your redundancy was voluntary.  Most MPPI policies will also not pay for claims that are related to existing medical conditions, back aches, stress-related conditions, AIDS or HIV-virus related illnesses, alcohol or drug abuse, and pregnancy and childbirth.        

What are the problems with getting a MPPI?

Salespeople are aggressively pushing MPPI policies even to people who may really have no need for them. They usually sell MPPI to borrowers who are pressured to finalise a mortgage and thus earning themselves big commissions in the process.  A lot of borrowers have bought mortgage payment protection and buildings and contents insurance in a hurry without fully understanding how these policies really worked.

Tags: Mortgage payment protection quotes | Mortgage payment protection quotes | Buildings and contents insurance | Buildings and contents insurance | Life Insurance and mortgages | Life Insurance and mortgages | Mortgage payments insurance | Mortgage payments insurance | Home insurance | Home insurance

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This entry was posted on Wednesday, June 3rd, 2009 at 1:04 pm and is filed under Commercial property realtor. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.