Mortgage protection, or mortgage payment protection insurance (MPPI), is part of an umbrella of short-term work related insurance products under an umbrella known as payment protection insurance (PPI). Also known as ASU coverage, the insurance provides short-term job loss protection due to accident, sickness, or unemployment. People can opt to choose coverage for all three of these events, but many customers opt for the unemployment protection, as they rely on other work related insurance for sickness and accidents. However, many choose to be covered by all three as premiums can be low and benefits are unique.
Since October of 1995, new home owners have had little short-term mortgage protection from the State. At that time, a nine month waiting period was instituted before the State would support unemployed people. Many Brits cannot wait that long and would risk losing their homes without some other type of funding, or insurance protection.
Although about 60 per cent of new mortgage borrowers are buying mortgage protection with their new loans, only about one third of all borrowers have the coverage. This is because up until now, many consumers have been unaware or uneducated about the benefits of the insurance, and how to get it at a lower cost.
Unfortunately, many customers have traditionally purchased mortgage protection from high street banks or large lenders. Rates from these institutions are often fairly high, making the insurance somewhat impractical. These organizations have also come under fire for several years for their use of deceptive or high pressure sales tactics. They often combine the insurance with mortgages or other loans, secretly, or by overwhelming customers.
It is vital that consumers explore low cost premium options available through insurance brokers, many of which operate online. Customers can quickly and easily sort through various products, providers, and benefits, and compare premiums costs of different types of coverage. Additionally, broker specialists typically maintain a better reputation for fair practices and generally are part of associations which maintain ethical standards for their members.
Income payment protection usually offers payout periods of 12 to 24 months, with small exclusionary periods up front. Payment amounts vary, but with a reasonable normal income, many individuals can get protection for their full mortgage payments, as well as some additional protection to cover other debt payments and living expenses. This short-term protection is sometimes confused with longer-term income protection, which has more advantages for long-term periods of unemployment. A big benefit of the income payment protection is that it covers involuntary redundancy, which is not available under the longer-term income protections.
Consumers need to speak with a broker specialist and be open about their particular mortgage protection needs. Brokers usually have premiums that are 40 to 80 per cent lower than traditional banks and lenders. Brokers can help explain the advantages of the mortgage protection and how it is unique. Essentially, the protection is intended to relive the burden of monthly financial obligations for individuals struggling with long-term health problems are forced unemployment. It is a peace of mind for many.
| Simon Burgess is Managing Director of the award-winning British Insurance, a specialist provider of mortgage protection. |
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