With newspaper headlines talking of recession and repossession statistics, it is no surprise that many homeowners might go through stages of being increasingly worried about their mortgages. A mortgage is often the biggest financial commitment an individual or family faces in their lifetimes, and although it is the method by which people can even afford to buy a house, it is also a potential minefield. Everyone knows that the failure to keep up with repayments can often end with the dreaded ‘r word’ but there are a few simple things you can do to protect against this eventuality. Mortgage protection insurance is just one option which may one day help you keep the roof over your head.
This kind of insurance is a payment protection insurance product and can be confusing to some thanks to its variety of names. It is often known as mortgage payment protection insurance or MPPI and specifically covers your ability to keep up with repayments on a home loan.
Once you get past the variety of names and providers, the essential core of the policy is quite straightforward and similar from one company to the next. Its main aim is to help keep you in your house after you have lost your income through no fault of your own. This normally means you have lost your job due to involuntary redundancy, illness, or injury after an accident.
A mortgage protection insurance policy will pay out regular cash sums which you can use towards your home loan and associated costs. You can usually choose to protect a slice of your regular mortgage outgoings, from perhaps 50 per cent upwards, and the more you protect the more you can expect to pay on a premium. Payments simply arrive in your bank account from an insurer on a monthly basis and this will continue for 12 months all the way up to 24 months on some policies.
Differences are found in how long you will have to wait before your first payment arrives after a successful claim. This can be anything from a month to 60 days after you lost your income, although some providers will backdate their payments. This is something to look out for and again may affect your premium.
Mortgage protection insurance, with its ability to cover not just the payments but the interest, plus other things, is therefore a powerful tool which you can use to stave off the more unpleasant impacts of losing your income through no fault of your own, possibly in an overall downturn. Useful as it is, it can also be important to make sure you get a wide variety of quotes so you pay a fair price.
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