When it comes to insurance, some people start to find the market and its associated jargon confusing as soon as they get past basic cover for their car. But there are a range of products on the market that may sound confusing, but which can provide vital protection if someone falls into sudden financial difficulty. A loss of income can be catastrophic for an individual or family, particularly if their home was bought with a mortgage provided by a bank or other lender. A mortgage is essentially a giant loan secured against a property and lenders can repossess a house if someone fails to keep up with repayments. This is why some people seek out mortgage protection cover, which may be an unfamiliar term to some people, but which can prove vital in times of hardship.
To first clear up some common confusion, mortgage protection cover is also known as mortgage payment protection insurance and can sometimes be referred to simply as MPPI. All of these phrases refer to essentially the same type of policy which will support someone’s ability to keep up with the regular mortgage repayments if they lose their income through no fault of their own.
Typical circumstances which will be covered by a policy include being out of work due to an illness or injury following an accident, or because of involuntary redundancy. All of these things can happen quite suddenly and also mean a person is out of cash after any initial buffers like sick pay or redundancy money run out. Policies are also available which will provide cover in the event that someone leaves their job to become a full-time carer for a loved one.
When it comes to the benefit involved, the process is often extremely straightforward. Following a period of around a month after the initial claim, the insurer will pay a cash sum to the policy holder each month which is designed to go towards the cost of their mortgage repayments. It will rarely cover 100 per cent of the regular home loan outgoings, but will meet a sizeable slice such as 50 per cent. Larger portions can be covered depending on the insurer, often for a more expensive premium.
Payments will normally continue for 12 to 24 months depending on the insurer concerned. If a person becomes well enough to work again or finds new employment after being made redundant involuntarily, the payments will stop before this period expires.
Getting a policy can be the only real tricky bit once the basics of mortgage protection cover are understood. Some mortgage lenders try to sell policies at ‘point of sale’ to people who are taking out a home loan with them. This type of cover is sometimes best avoided, and shopping around less ‘high street’ firms like independent payment protection provider British Insurance can often save a substantial amount of money.
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