Few people are in a position to purchase a new home without taking out a mortgage; in fact, in London, around 75% of properties were bought with the help of a mortgage last year. Although conversations about mortgages may seem dull and daunting – the opportunities that mortgages provide are really exciting!
A new home and chapter, independence, a place to call your own and a physical asset to show for how hard you’ve worked and how far you’ve come. Plus, you get to do what you want with it without seeking permission of your landlord. Offensively coloured bathroom tiles and seriously dated living room furniture – so long and farewell!
If mortgage payments are something you don’t wish to dwell on, additional costs on top are unlikely to be your favourite subject either. We understand that. But thinking about how much of your earnings go towards paying this off can be a sad enough prospect when all is running smoothly. It would be an extremely daunting prospect if you didn’t have your normal income due to an unforeseen reason or outcome.
Just as few people are in a position to avoid mortgages altogether, there are few reasons that mortgage insurance cover may be unnecessary. We’ve outlined exactly what mortgage protection cover provides so that you can figure out whether it’s right for you.
What is mortgage protection insurance?
Paying your monthly mortgage fees is likely to be dependent on you or your relative’s monthly income. Mortgage payment protection insurance (MPPI) will cover your monthly payments during a period when you or your relatives aren’t able to. If you suffer an accident, fall ill, or are made redundant unexpectedly, MPPI will cover the costs of these payments for a limited amount of time whilst you are out of work.
The policies that are available
Your policy could be unemployment only, accident and sickness only, or cover both sickness and unemployment. With unemployment only policies, the insurance company pays out only if you are made redundant. Accident and sickness, on the other hand, will pay if you are unable to work due to an unforeseen illness. Most brokers offer policies that will settle your insurance payments for up to twelve months. However, some will cover you for a maximum of two years.
What it will not cover
Whatever policy you choose, if the reason you can no longer work and keep up with your mortgage payments was foreseen, you will not be covered. What this means is that, if you had advance warning of the situation leading to your need of an insurance payout, the broker argues that you should not have relied on your policy to cover this; you could have made arrangements yourself and avoided the need for a payout. Of course, without such a clause, there would be a lot of potential for people to take advantage of policy payouts.
What MPPI costs
This will depend entirely on the sum of money you would need on making a claim. Most policies enable you to choose just how much you’d like to receive when it comes to making a claim. There are plenty of options at your disposal. The reason for this is that depending on your current situation and financial responsibilities there could be multiple payments you miss due to your absence from employment. You may need your provider to cover your mortgage payments alone.
If your family rely on your income too, your mortgage payments and bills may need to be covered. If you have savings or a partner’s income to fall back on, you might want to work out what percentage of your salary you would need your insurance to cover for a short-term period. Whatever your reasons for considering mortgage payment protection insurance, our team of experts will be on hand to answer all your questions and help to find a policy that’s the best fit for you.
Next question – is mortgage protection insurance necessary? Luckily for you, we’ve written a post on that too.
To find out more about mortgage protection cover and the other services we offer, get in touch. If you’d like to come prepared – take a look at our mortgages made simple infographic explaining mortgages in plain English.