Mortgage Payment Protection Insurance
(MPPI) & Accident, Sickness & Unemployment Insurance (ASU)
There is a huge deal of confusion about Mortgage Payment Protection
Insurance (MPPI) and Accident, Sickness & Unemployment Insurance
(ASU). They are effectively the same thing. A mortgage payment protection
policy is set up to pay mortgage related costs should you be in
a position where you can’t make the payments yourself. It is also
possible to insure yourself if you do not have a mortgage.
Where a policy is specifically taken out to protect a mortgage,
the benefit must relate directly to your mortgage costs, although
some policies will allow a small additional benefit to be paid if
required. It is important to decide what eventualities you want
to cover. Many self employed people would instantly lose their income
if they were unable to work due to accident or injury, therefore
they would seek to cover these eventualities. They may not however
necessarily want to include unemployment cover as it may be difficult
for them to prove in the event of a claim.
People in regular employment may not be as concerned about covering
accident and sickness, if they feel their employer will pay them,
but they may be concerned about redundancy and their chances of
finding work elsewhere. In this case they may only want a policy
that covers unemployment.
For the vast majority of people, both unemployment and the impact
of long term sickness or injury are of sufficient concern to make
them to decide upon a policy that covers all eventualities.
A policy taken out to protect income normally allows you to insure
a percentage of your gross income. It is not possible to protect
all of your income as the insurer wants you to be incentivised to
return to work.
These policies are available upon application without the need
for underwriting or medical examination. Some of the larger insurance
companies issue policies that coincide with the term of your mortgage,
however the most popular policies have no specific term and are
renewable annually.
If you are unable to work because you have become unemployed, or
you are long term sick, or have an accident, you will not receive
any financial support from the State until 9 months have elapsed.
After this point, if you qualify for assistance, you will only
receive sufficient support to pay the interest element of your mortgage,
and even then help is restricted to the first £100,000 of
your mortgage. Different rules apply if you took out your existing
mortgage before 1 October 1995.
There is no financial support available from the State to help pay
off the actual mortgage debt, nor to pay for any associated life
insurance or mortgage related savings plans.
If your partner works more than 16 hours per week, or you have
savings of more than £8,000, you will receive no financial
help whatsoever.
Whilst your mortgage company must deal with your situation sympathetically
and positively, ultimately your home is at risk if you do not keep
up payments on a mortgage or other loan secured on it.
There is a 1 in 7 chance of a working adult being off work for
more than 6 months due to illness or injury.*
More than 2 million people have been off work and claiming benefits
for a period of 6 months or more.*
You are three times more likely to be off work for more than 3 months
due to illness or injury than to die before age 65.*
* Source - Department for Work & Pensions (DWP), 2004
To find out more information please contact
us
Your home may be repossessed if you do not keep up repayments on your mortgage.
There may be a fee for mortgage advice. The precise amount will depend on your circumstances but will be a maximum of £250, this fee will be payable on completion.
The guidance and/or advice contained within this website is subject to the UK regulatory regime and is therefore targeted at consumers based in the UK. |
