Insurances

Mortgage Payment Protection Insurance (MPPI)
Mortgage Payment Protection Insurance (MPPI), to give it its full title, is a type of insurance that is commonly sold to borrowers when they take out a mortgage. An MPPI policy is designed to cover the cost of mortgage repayments if the borrower becomes unable to work as a result of sickness, accident or unemployment.

Mortgage Payment Protection Insurance Basics
MPPI is not compulsory, but some lenders will put pressure on borrowers to take out a policy before confirming a mortgage offer. Reputable MPPI policies will start to pay out one month after confirmation is received that the borrower has ceased working as a result of sickness, accident or redundancy. Payments will continue until the borrower is able to return to work or for a period of twelve months, whichever is the shorter time.

The terms and conditions of MPPI policies are often complex and can involve many potential exclusions, so reading the small print is essential when choosing an MPPI policy.

Mortgage Payment Protection Insurance Criticisms
Complaints about MPPI have been widespread for several years and the Competition Commission is currently reviewing the whole area of payment protection insurance.

The biggest single complaint against MPPI is that mortgage lenders are selling the insurance to a captive audience. Premiums are often excessive when compared to those charged by independent brokers for similar policies. The Office of Fair Trading (OFT) has estimated that for every pound taken in payment protection premiums, only 19 pence is paid out to cover customers’ claims. This suggests that some companies are profiteering on a large scale.

The high level of premiums coupled with the complexity of MPPI policies and the range of exclusions involved suggests that many customers are not getting a fair deal from this type of insurance.

Do You Need Mortgage Payment Protection Insurance?
The obvious question to ask when considering MPPI is whether it gives appropriate protection in your particular circumstances.
Ask yourself the following questions before you decide whether you need MPPI:

• If you lose your job, would you receive an adequate redundancy deal?
• If you have to give up work as a result of injury or ill health, what benefits would you be entitled to?
• Is your mortgage deal flexible enough to allow you to make underpayments or overpayments and are there any conditions attached?
• Would Income Protection Insurance (IPI) be more appropriate than MPPI?

If after answering these questions you do think that you need MPPI, be sure to shop around. Talking to an insurance broker or an independent financial adviser is likely to be helpful.

Alternatively, you can compare MMPI policy prices online at:
www.britishinsurance.com/mppi-rate-comparison.html
Mortgage Payment Protection Insurance certainly offers useful benefits to some borrowers, but is not a panacea for all mortgage holders.