Mortgage Payment Protection Insurance (MPPI) is designed to protect your mortgage repayments, and therefore your home, in the event that you lose your job, or cannot work for another reason.
MPPI policies are subject to a considerable number of conditions and restrictions, which make it prudent to consult a financial adviser when considering this form of cover.
MPPI pays out an amount equivalent to your mortgage payment when your income stops because of accident, sickness or redundancy. Most do not pay if you stop working or lose your job within six months of taking out the policy.
When a policy does pay, there is usually an ‘excess period’, which is the length of time between your finishing work and the policy beginning to pay out. While this excess period is normally one month, policies do vary, and it is always worthwhile for you or your adviser to check the ‘small print’.
Once the excess period is over, your mortgage is then paid by the policy, usually for 12 months.
When will the policy not pay?
A typical policy will refuse to pay if you are not working due to a medical condition you knew about when you took the policy out, or in the event of a previous medical condition that returns during the first year of the policy.
Back injuries and stress-related problems are two of the most common ailments causing workers to take time out from work – but both these are excluded from most mortgage protection policies.
Other situations which will not be covered in a policy include voluntary redundancy, dismissal for misconduct, or when you voluntarily resign from your position.
Another aspect of MPPI is that it does not apply to you if you are self-employed.
