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If you lose your job, become sick or have an accident that leaves you unable to work, your mortgage still needs to be paid regardless. And the state will only offer minimal help. Since 1995 the Government will only step in after you have been unable to service your mortgage for nine months – and then will only pay the interest on the first £100,000. How does it work?Previously better-known as ASU (Accident, Sickness and Unemployment), MPPI is designed to pay out a sum equivalent to your mortgage repayments if you are unable to work due to accident, sickness and, usually, redundancy. On claiming it is paid monthly.
The product works on a ‘one price for all’ basis, so the price of your policy should depend on how comprehensive the cover is and/or the value for money that the insurer provides. MPPI is charged at a set amount per £100 worth of cover So, for example, if the insurer charges £5 per £100 of cover and you want to protect your total monthly mortgage repayment of £700, your MPPI will cost £35 a month. MPPI typically only pays out for a year, although in some cases it can be 18 months or two years. There are also often ‘excess’ or ‘waiting’ periods of up to 60 days before your claim will pay out.
What are the pros and cons?MPPI is notorious for being littered with exclusions, such as the reason you lose your job – if it is as a result of poor performance, or even a personality clash, it may not pay out. Time off work as a result of stress-related illness may also not be valid. MPPI does not cover you for pre-existing conditions at the time of taking out the policy, but these are also reviewed every 12 months. So, basically, the insurer is on to a winner. And once you have claimed and returned to work, the policy becomes null and void. Furthermore, the insurer can change the terms and conditions of the policy at any time. However, as the premiums charged are the same for everybody, the cover could prove good value for older people, or for those in poor health – although it does not include death benefit.
CashQuestions Guide to Home Insurance
CashQuestions Guide to Payment Protection Insurance
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