Income Protection versus Mortgage Payment Protection Insurance
Mortgage Payment Protection Insurance (MPPI) also known as Accident, Sickness and Unemployment insurance (ASU) is a mortgage-related benefit, it does not provide a benefit related to your income.
Mortgage Payment Protection Insurance can pay out for:
- Ill-health or redundancy
- Ill-health only
- Redundancy only
The cost of the cover will be determined by which element or elements you choose, for example, 'redundancy only' cover will be cheaper than 'ill-health or redundancy' cover.
It is designed to pay money to you each month, to enable you to continue to meet you monhtly mortgage payments and 'mortgage related outgoings' for a limited period of time.
MPPI Benefit Limitations:
Most currently-available MPPI contracts will pay out for a maximum of 12 months for any one claim.
(There are some MPPI contracts available that will pay out for up to 18 or even 24 months.)
There is often also a maximum overall limit to the total number of claim payments that may be made.
For example, a customer who had a contract with an overall limit of (say) 36 possible payments made a redundancy claim (or for ill-health, it doesn't make any difference) and was paid out for 8 months, when the payments stopped, because he or she found a new job. There would now be a total of 28 possible further monthly payments that could be made remaining on the policy.
If you are made redundant, the redundancy element of MPPI cover does provide you with a valuable window, of up to 12, 18 or 24 months, depending on your cover period; during which you can look for work, without having to worry about paying your mortgage.
If you are simply made redundant, ill-health does not prevent you from looking for work.
However, if you are unable to work for health-related reasons, what happens at the end of the benefit period when the MPPI payments stop and you still cannot work? How do you then pay your mortgage?
Therefore, mortgage payment protection doesn't solve the problem of how you can continue to pay your mortgage if health stops you from working, it only defers it.
Ideal Solution?:
As pointed-out above, it is possible to have cheaper mortgage payment protection covering 'redundancy only'.
We feel the 'perfect solution' is to combine the 'redundancy only' element of MPPI with long-term income protection cover, which, if you are ill, can pay you not just for 12, 18 or 24 months, but until you retire!
In addition, income protection does NOT (other than cover ending at your selected retirement age) have an overall maximum to the number of claim payments that can be made. You can claim over and over again (if necessary) on your income protection plan.
The cost of this 'ideal' combination of 'redundancy only' MPPI and 'income protection to retirement' cover compares very favourably with limited payment period MPPI redundancy and ill-health cover.
