Mortgage Payment Protection Insurance - MPPI

What is this?

Mortgage Payment Protection Insurance is a policy which is intended to pay a regular sum in the event of becoming unemployed or unable to work through illness or injury. Sometimes referred to as an Accident, Sickness or Unemployment (ASU) policy, cover is restricted to a maximum of 24 months but usually the terms is 12 months. The purpose of the policy is to ensure that mortgage payments and associated insurance policies are maintained during a short period of low, or no, income. The Government does not provide any assistance to home-owners in these situations until at least 10 months have passed. If you fail to make your mortgage payments for this period, it is likely that the mortgage lender will already have repossessed the property before assistance is available.

Who is it for?

The ‘Unemployment’ provision of an MPPI policy provides an invaluable safety net for employed mortgage borrowers to ensure that their payments are maintained if they lose their job. The intent is to give the insured time to find and secure a new position. Similarly, the ‘Accident & Sickness’ provision maintains essential payments if the insured is unable to work for medical reasons. Both these parts of the policy are restricted to the period of the mortgage term, with a maximum cover age of 65 and with a maximum pay-out period of 12 (or 24) months. MPPI policies can be paid for monthly – but this means that cover ceases if you stop paying. They can also be paid for by a single premium, usually at the start of the mortgage, however, this is usually an expensive way of paying as it is normal to add the cost of the premium to the mortgage so you pay interest as well. Monthly paid MPPI cover is a quite cost-effective means of providing basic protection for a short period.

Who is it not for?

This insurance is not available beyond the age of 65. Some insurers do not offer policies if you are engaged in some professions. Certain pre-existing conditions may be excluded from the insurance policy. If you are self-employed, the only way you can claim on the ‘Unemployment’ provision is for your business to be wound up ‘involuntarily’, in other words – forced to close by a court. The policy cannot be used to protect payments on a Buy to Let or Commercial property. The monthly protection amount is also restricted so, if you have a large mortgage, an Income Protection policy may offer more suitable protection