If you were suddenly made redundant or you became unable to work due to injury or prolonged sickness, how would you pay for your mortgage? Certainly, you shouldn’t rely on the State to care for you during unemployment or incapacity. Government support for unemployment is usually very little and the number of people that receive assistance is minimal. However, the answer could be mortgage protection insurance.
Are you familiar with mortgage payment protection insurance (MPPI)? If so, you are giving yourself a great financial advantage. If not, you need to use this guide as an opportunity to learn why you need this insurance for unemployment protection, and how to get the most from your product.
Mortgage payment protection is a very important cover that helps you repay your monthly mortgage obligation while you are out of work via a series of tax free monthly payments. This means that you can still service your mortgage debt, even if your income has been lost through no fault of your own.
An overview of mortgage protection and payment cover policies
There are three types of payment protection insurance (PPI) cover, or which mortgage insurance is one. Each of the payment protection products pays monthly benefits, tax free, that are designed to help replace your lost monthly income for a covered event. However, their intentions are different.
Mortgage cover we have already discussed. Loan protection insurance is used to save your credit rating through repayment of monthly loan and credit card obligations. Income payment protection is great for paying bills and buying groceries, among other financial requirements. Regardless of the product, this type of insurance is necessary for anyone on a budget who needs job income.
There are several key policy features that you need to know that greatly affect your ability to get good value from payment protection. Let’s focus on three very important ones to get better insight into the products. One is the length of benefits payouts. Some policies pay benefits for 12 months, while others pay benefits over the course of a 24 month period of time.
When will benefits start?
Another extremely crucial feature, of which you must be aware, is the originating point of benefits. Some policies make the initial benefit payment just 30 days after the insured event. This is idea if you are a family on a budget. Others pay after 60 or 90 days, which might be okay if you have savings or a good severance package.
A third important trait is the maximum benefit for a policy. While you are always in control of how much cover to pay for, the maximum benefit usually allowed with mortgage protection, or other payment protections, is the lesser of 1500 Pounds or half your normal monthly income. Remember, though, that the benefits are tax free, so your usable income is significant and will help sustain you while you are out of work.
Of course, before even concerning yourself with these elements of payment protection, first know whether you are even eligible to collect benefits. Not everyone is. Retired people, part time employees, and people with pre-existing medical conditions are among consumers commonly excluded from protection. Usually, you must be employed full time for six months to be eligible.
Standard events covered by payment protection
Along with involuntary redundancy, many providers of mortgage protection, income payment protection, and loan protection also allow you to add cover for illness or accidents, should these not be covered by your employer. In fact, you can cover both circumstances, or one or the other with many provider plans.
Why not get full protection? As noted, some employers already offer accident and illness protection, making the purchase of this cover unnecessary. Other people that do need to buy their own protection for illness and disability don’t want redundancy benefits. This is usually only the case if you have a good education and work skills and are confident you can find work. Be sure you have adequate savings or other income before taking this risk.
Another benefit that you might want to insist upon with any policy is a protection known as Carer cover. Some providers actually throw this protection into their policies at no extra charge. Though sometimes considered an “add-on” by consumers, this may be the most important protection to you, if you have to leave work to manage the health of a close family member.
Comparing providers of payment protection insurance policies
Financial institutions have long dominated the payment protection sector, but this has changed much recently. Now, more consumers are starting to recognizing the better value available through independent insurance specialists who have more expertise and much better rates.
For years, large banks took advantage of unknowing consumers and packaged their expensive protection products with loan products to hide their true expense. Many consumers bought cover and were largely unaware they had it, and what it could do for them. In 2005, leading consumer advocate Citizen’s Advice filed a super complaint with the Office of Fair Trading (OFT). The complaint addressed mis-selling of policies, an issue dealt with in 2007, when the Financial Services Authority fined several high street companies. It also pointed out the bundling of loans and insurances that often led to pressure selling and deception of consumers.
The OFT referred the payment cover industry to the Competition Commission for further review. The Commission did review the sector and issued several recommendations for improvements, many of which are in place. One change is a seven day ban on the sale of payment cover to a new borrower. This helps to remove some of the pressure used by lenders to get borrowers to buy their expensive products. You can now more freely shop the open market and get much better value with an independent provider. This means affordable mortgage protection and peace of mind!
Along with a more customer-friendly approach to their products, independent insurance specialists offer great discounts on the payment protection products compared to the prices at financial institutions. Mortgage protection, for instance, can be up to four times less expensive when purchased through a standalone provider. You can also get a great deal on the other types of cover too. There are great savings for consumers who once were compelled to pay much more through financial institutions. There is no reason anymore to not have an adequate cover in place.Take action today and get your family protection for involuntary redundancy and perhaps accidents and illnesses that keep you from work.
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