Here are the different types of MPPI
What is mortgage payment protection insurance?
Mortgage payment protection insurance, or MPPI, will cover the cost of your mortgage payments should you be unable to make them due to illness or unemployment. Since a mortgage is one of the largest expenditures for most people in the United Kingdom, it is important to have protection in the cases of illness or unemployment so that you do not risk losing your home.
The two primary options for protecting oneself include procuring general income protection insurance, wherein the money you might get can be used for just about anything, or taking out protection insurance specifically to cover you for mortgage payments. In the event that you are no longer getting regular income, mortgage payment protection insurance will let you keep paying off the mortgage.
Factors that will affect your MPPI cost
The factors that will affect your MPPI cost are dependent on your situation, and include: salary, size of mortgage repayments, type of policy and how soon you want to be covered.
Types of MPPI
There are typically three different kinds of mortgage payment protection insurance, which include:
Unemployment only. This type of MPPI will cover you if you lose your job.
Accident and sickness only. This type would cover you if you suffer a serious injury or if you have a long-term illness.
Accident, sickness and unemployment. This will cover you both if you suffer a serious injury or long-term illness and if you lose your job.
Will my job affect how much I pay the MPPI?
Yes. Your job may affect how much you pay in mortgage payment protection insurance (MPPI). Typically, insurers differing risk categories based on jobs. Here are some examples of how your job’s risk level might be classified (note: Class 4 is the riskiest):
Class 1. Administrative staff, secretaries, administrative clerks, staff with limited business experience, computer programmers, managers, professionals.
Class 2. Skilled manual workers, engineers, shop assistants, florists, some workers with a lot of business experience.
Class 3. Plumbers, some semi-skilled workers, skilled manual workers, teachers, care workers.
Class 4. Some unskilled workers, heavy manual workers, construction workers, mechanics, bartenders.
While insurers will typically provide for self-employed workers, make sure that you carefully read the smaller print to ensure you are not exempt. An example of this could be if you are on a fixed-term or casual contract.
Alternatives to mortgage protection insurance
If you do not qualify for mortgage protection insurance, or prefer to go another route, there are alternatives. Prior to taking out a MPPI policy, you should consider other insurance policies that might be more tailored to your specific needs. The following are a few examples:
Income protection. Should you be unable to work due to an illness or an accident, income protection will cover a portion of your salary. In some cases, an income protection policy will pay out for a longer period of time than a mortgage insurance policy would; for instance, until you reach retirement age or when you can return to work.
More than mortgage payment protection insurance, income protection policies are typically a better option if you want to insure against health issues that would prevent you from working. Since you are medically tested prior to receiving income protection policies, you will be more aware ahead of time what you may or may not be covered for. The caveat, of course, is that income protection policies usually end up being more expensive than mortgage payment protection insurance.
Critical illness cover. If you are diagnosed with a serious illness, critical illness cover will pay out a one-time lump some. Critical illness cover will not, however, pay a regular income over a longer period of time.
Employee benefits. You should research to see if there are benefits in place already with your employer prior to taking out additional protection insurance. If you require taking off time due to an illness, many companies will continue to pay your salary, at least in part. There are cases in which your employer will already offer income protection insurance.
Life insurance. Since life insurance only pays out in the event that you should pass away, it is less an alternative to mortgage payment protection and more for your dependents, because it pays out in a one-time sum after you die. To cover the price of your total outstanding mortgage debt, you can opt for a lump sum of the appropriate amount.
Government help. You might also qualify for state benefits like employment and support allowance or jobseeker’s allowance, in the event that you lose your job. For those who are eligible, you could apply for a Support for Mortgage Interest, or SMI, loan.
