Mortgage Payment Protection Insurance.

Monday, February 20, 2012

Mortgage Payment Protection Insurance (MPPI) pays your monthly mortgage payments for a specified period if you suffer accident, sickness or unemployment.

Lenders and insurers have agreed to adopt certain minimum standards for MPPI, so you can be confident that the level of cover you will be offered meets or exceeds these.

How does MPPI work?

You pay a premium each month whilst the mortgage is running. If you become unemployed, or unable to work due to accident or sickness, the policy starts to pay out (usually direct to your lender) to pay your mortgage. To keep the cost of the insurance down, there are some periods where you will not be covered (you should check the individual policy for exact details). The main ones are an "exclusion period" of up to 60 days when you first take out your policy, during which any claim for unemployment would not be met (although claims for accident or sickness would be paid).

In addition, there is an "excess" or "waiting" period of up to 60 days for each claim, during which no payments will be made. So it makes sense to try to keep enough money in savings to cover two months worth of mortgage payments, even if you have MPPI.

There are some circumstances where MPPI will not voer you - for example, unemployment caused by misconduct, or that you knew was impending at the time you took out the insurance, or sickness claims caused by certain pre-existing medical conditions.

See also: Unemployment Insurance

What sort of insurance can I have?