Is it possible to insure against my mortgage repayments?

When people take out a home loan they don't always consider a mortgage payment protection insurance (MPPI) policy. The government have stopped providing financial assistance for those with a mortgage who become unemployed - this means that they won’t provide benefit for the first nine months. They also then set up minimum standards for policies to ensure that customers get a fair deal.

Most people assume their savings or state benefits would cover the repayments should they not be able to work - but this is often not the case!

Many borrowers find that their savings are insufficient, and will not cover them for an extended period. A man with two children will get a maximum of £6883 a year of state benefits if out of work, so mortgage repayments are not likely to be adequately met without some sort of protection.

MPPI, whilst not compulsory, is often a condition of large loans. MPPI cover should always be considered by anyone taking out a mortgage. Many people financially over extend themselves, taking out mortgages that they can only just afford whilst in their current employment, (in recent times this has been encouraged by mortgage lenders – more for their benefit than yours.) In periods of illness or unemployment these financial commitments simply cannot be sustained leaving you with the risk of repossession.

State benefits are means tested, so you are expected to use your savings up before you can receive benefits. This is where an insurance policy that covers mortgage related bills can be essential, as all the hard work of saving can be used up in a very short period illness or unemployment, without income protection.

Good MPPI policies will kick in after one month after you're out of work, through redundancy or illness. The policies will pay out for a period of around 12 months. By the end of this period you are expected to have found new employment or have recovered from your illness.

Should you have a long term illness,{ life insurance } MPPI would not be sufficient. For long term illness cover you would need Income Protection rather than MPPI. MPPI is a short-term insurance product, and because it is short term the premiums are usually considerably cheaper than a long-term illness policy.

Once you become unemployed you must inform your insurance provider, they will then check that you are genuinely unemployed, and after a month your payments will begin. Typically, payments are made directly to your mortgage lender, rather to the customer. This prevents the client from using the cash for other things.

-- Please Note --
This web site is owned and managed by Alliance Internet Ltd..

Alliance Internet Ltd is an Appointed Representative of Financial Connexions Ltd. Financial Connexions Ltd is authorised and regulated by the Financial Services Authority.