A million mortgage holders are due to get an automatic payout on their insurance policies. If you've a mortgage payment protection insurance policy (MPPI), the City regulator, the then FSA (now called the Financial Conduct Authority), is forcing all providers that hiked costs in 2009 to automatically repay the increase.
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Here's a quick Q&A on who it affects and what you need to do.
Find out if you qualify for FSA-ordered refunds
Q. Why's this happened?
A. MPPI covers mortgage repayments if you can't work due to an accident or sickness, or if you're made redundant. Providers upped prices during the recession to offset the increase in claims as more people lost jobs. The FCA said when prices changed, customers should've been given the chance to cancel their contacts.
Q. Who'll get cash back?
A. People who've got policies where the costs increased this year.
Q. How do I reclaim the money?
A. Just wait. Your monthly payment will be frozen at what it currently is. Yet by next June, insurers must give back the overcharge. Most paybacks are expected sometime in early 2010.
Q. How much will I get?
A. The difference between what you were paying before Jan 2009 and the amount it increased. For a typical MPPI on a £200,000 mortgage, expect this to be around £150-200.
Q. Is my price now fixed?
A. No. Insurers can increase prices from next Jan by cancelling your current contract, and offering a new, more expensive quote. However, they can't incorporate any rises because of any new medical conditions since you bought the policy.
Q. What should I do then?
A. See if you can beat the price. This'll be especially easy if you got cover from your mortgage lender; you may be able to halve the cost, saving up to £500/year (read the full MPPI cost-cutting guide). Yet beware switching if you've developed a medical problem or have the forseeability of redundancy, as the new provider may exclude it.