If I said mortgage payment protection insurance was sexy, would you believe me? Probably not, but to me it's raunchy, as it's just so easy to save on it; roughly £300 a year for most people. This is because many have policies due to their mortgage lenders' hard sell, without being aware the same cover's available elsewhere at half the price.
|
|
State help to cover mortgage repayments is limited, especially for anyone who took out their current mortgage after 1995. Then it only kicks in after nine months and covers the interest cost on the first £100,000, but not any debts consolidated into the mortgage (although those with savings over £8,000 or a partner working more than 16 hours a week are excluded). MPPI is designed to fill the gap, thus most policies only pay out for 12 months (for more details see benefits notes).
Thus some should simply scrap it, others just get accident and sickness cover or just unemployment cover, at a much cheaper price.
· Would you get redundancy? In the event of unemployment, if you'd get a big payout for long service, the unemployment element of the cover is often unnecessary.
· Do you get decent sick pay? If an accident or sickness stopped you working, what would your firm do? Many public sector workers get a substantial proportion of their salary. If you've got good sick pay terms, the accident and sickness element is probably unnecessary.
· Are you self-employed? Most but not all policies now cover the self employed, though only if the business ceases to trade due to circumstances beyond your control - yet always check.
· Got sufficient savings? MPPI only lasts a year, so the maximum payout is twelve times your repayments. If you can cover this from your savings anyway, there's really little need to throw money at a policy.
· Got an alternative policy? Many other policies cover similar circumstances; the most common is permanent health insurance which pays out a proportion of your salary if illness prevents work. It is more expensive, but it pays for longer and can be used in conjunction with unemployment-only MPPI.
Don't get the message from this that MPPI is always bad; done correctly it's a cheap way to protect yourself, ensuring you wouldn't build up debts to make mortgage repayments. Just make sure you know what you need.
Surprisingly, standard MPPI policies' prices don't depend on age, smoking or other factors that increase the likelihood of a claim. So a 22-year-old vitamin popping yoga-guru pays the same as chain-smoking 62 year-old professional wing-walker.
Yet policies do vary, so check it meets your specific requirements, including:
· When will it pay out? Policies normally start paying out 30 or 60 days after the problem occurs, yet most are now ‘back to day one' which means they backdate the benefit so you'll be paid out for the earlier period too.
· Policy Periods are limited. They only pay out for a limited term, usually 12 months, then the State should start helping most.
· There's a maximum payout level. Many policies limit the monthly payments covered, often £1,500 or £2,000 per month, so those with bigger mortgages may find this a problem if interest rates rise.
· Switching isn't always good. It should simply mean cancelling your existing cover and getting a new one. Yet many policies operate initial exclusions preventing claims within the first three to six months, and some don't pay out to anyone with pre-existing medical conditions or a ‘forseeability' of redundancy when it's taken out. Don't switch if you'll fall foul of this.
If this is too much for you and you get confused or worried, be safe not sorry, an independent mortgage broker or IFA will be able to guide you through, just beware of lenders' sales spin.
MPPI policies are usually bought with mortgages, and although a few building societies offer exclusive low price policies, most lenders charge way over the odds, typically £5.50 per £100 of monthly mortgage repayment.
Yet the number of standalone MPPI providers is growing. The following are the cheapest 30 day payout, back to day one policies, for full ASU (if you're looking for just unemployment or just accident and sickness, these are still the winners).
· Under 50s. The small number of age related policies win out here, Best Insurance* is cheapest for anyone under 50, charging just over £1.60 per £100 for a 20 year old rising to £3.55 for a 49 year old. Antinsurance (technically income protection, but simply apply for the amount of cover which matches your monthly mortgage repayment) comes a very close runner up.
· Over 50s. Here non-age related policies win. Paymentcare's low rate option* is £3.70 per £100, followed closely by British Insurance* whose policy, unlike Paymentcare's, has
· Specific Cases. Price comparison website Moneysupermarket* does have an MPPI comparison tool which is useful for those with specific requirements. However it misses some of the very cheapest providers, as they don't have commercial relationships with it, so always try the providers listed above first.
These policies premiums rarely change, but if they do, you can just cancel and switch to the new cheapest.
MPPI Policy Details | ||||
Policy Name | When it pays out | Back to Day One? | Cover limit | How long does cover last? |
Antinsurance | 30 | Yes | £2000 / 75% of net income | 12 months |
Best Insurance | 30 | Yes | £2000 / 65% of gross income | 12 months |
British Insurance | 30 | Yes | £1500 / 65% of gross income | 12 months |
Paymentcare | 30 | Yes | £2500 | 12 months |
The savings available for switching policy are huge. For anyone paying £800 a month on their mortgage, with the standard Abbey ASU cover, it's £580 over a year, yet Best Insurance costs just £180 for a 30 year old and Paymentcare £360 for someone aged 50.
Massive Savings on mortgage cover | ||||
Back to Day 1 ASU, covering £800/month repayments | ||||
| Cost/£100 repayment | Monthly Cost | Annual Cost | Annual Saving |
Expensive Bank Policy | £6.00 | £48 | £580 | - |
Top Policy aged 50 | £3.70 | £30 | £360 | £220 |
Top Policy aged 30 | £2.00 | £16 | £190 | £390 |
| |
| |
| |
| |
| |
Want To Discuss This Or Ask A Question? | |
| |
Always double check the product details before signing up to them
Spotted a brokenlink/out of date info? Let me know at brokenlink@moneysavingexpert.com
LINKS THAT HELP THIS SITE (all have a * in above article)
(this has no impact on product or recommendation - see explanation below)
Moneysupermarket, British Insurance, Paymentcare, Best Insurance
How this site is funded. Two types of contacts are listed. The first, which all have a * within the main body of the articles, help MoneySavingExpert.com stay ad-free and free to use, as they're ‘affiliated links' which invisibly take you usually via affiliate linkage or commercial money sites, which then pay this site. The second type doesn't help and therefore doesn't have a *.
You shouldn't notice any difference, the links don't impact the product at all and the editorial line (the things I write) is NEVER impacted by the revenue. If it isn't possible to get an affiliate link for the best product, it is still recommended and still included in exactly the same way. For more details read how this site is financed.
LINKS THAT DON'T HELP THIS SITE
(please only use if necessary)
No * Link Available: Antinsurance
Duplicate links of the * links above for the sake of tranparency, but this version doesn’t help MoneySavingExpert.com: Moneysupermarket, Paymentcare, British Insurance, Best Insurance