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Mortgage Payment Protection Insurance

What is it?

Mortgage Payment Protection Insurance (MPPI) offers you the option to cover from events such as Accident Sickness and Unemployment (ASU). In the event of a claim the monthly benefit is payable should you be unable to work as a result of illness, accident or lose your job through not fault of your own such as involuntary redundancy. MPPI is linked to your normal mortgage repayments (excluding any overpayment you may make) but most policies allow you cover cover 25% or more on top of your mortgage payment. If cover is linked to another debt such as a loan or credit card the cover is typically know as Payment Protection Insurance (PPI) and is essentially the same cover with a different name. You can however still buy cover unrelated to any mortgage or other debt and may cover a set percentage of you income.

The nature of the policy is to offer short term financial support. Premiums and the policy terms are typically reviewable monthly meaning the insurance company can alter the cover or premium without your consent just by giving you notice. Income protection insurance offers better terms as the policy cannot be cancelled no matter how many claims you make, however income protection does not normally offer the option to add unemployment cover (although a few providers now offer this option) so you may need two separate policies to be fully protected.

Unemployment Insurance The Essential Elements

  1. What is Redundancy Insurance / Unemployment Insurance?
  2. When Will The Redundancy Insurance be Active?
  3. Why Do I Need Unemployment or Sickness Protection?
  4. What is Not Usually Covered?
  5. Redundancy Insurance with no initial exclusion
  6. Cessation of business insurance (unemployment insurance for self employed)
  7. More topics covered in our blog

QuoteMe4 The Income Protection Specialist

Accident Sickness Redundancy Insurance

Short-Term Accident Sickness / Unemployment Cover

  • We offer market leading Accident Sickness and Redundancy insurance, some with significant discounts.
  • You can compare up to 84 quotes in seconds online.
  • Option to protect from sickness accident and unemployment or just Redundancy Only.
  • You can protect your income a mortgage or a loan or a combination.
  • We offer cover that can protect 90% of your net take home pay if you are insuring household expenses and other commitments.
  • We can offer protection to cover up to £5,000 per month for unemployment (with one provider) or more if you combine cover with two or more products.
  • Some policies may offer free cover for a period of time.
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Long-Term Accident Sickness Protection

Protect your income from long-term Sickness or Accident. Cover pays a regular monthly income if you are unable to work as a result of sickness or accident to provide you with a replacement income for the rest of your working life. Compare quotes online.

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What is Redundancy Insurance / Unemployment Insurance?

When considering ASU or MPPI cover some policies offer "Redundancy Insurance" and others "Unemployment Insurance". The use of the terminology usually imply's a significant difference which can impact on the cover being offered. The use of both terms normally imply's they will cover involuntary redundancy but only policies offering "Unemployment Insurance" will cover involuntary redundancy plus termination of your contract of employment (if you have not breached the terms of your contract).

Therefore "Unemployment Cover" offers a higher level of protection and worthy of consideration. Always read the policy terms and definition of the cover so you know what is being offered before you buy.

When Will The Redundancy Insurance be Active?

All Accident Sickness with redundancy insurance policies have a set waiting period (excess) before you can make a claim on the cover. This is maybe 30 days with benefits paid back to day 1. However when you first apply for cover the unemployment part may have an additional clause which means that this part of the protection is inactive for a set number of months as a result of an "initial exclusion" period to ensure that you cannot claim or put in a claim that is notified to you in the early few months of you starting your cover.

Applicant takes out a Accident Sickness & Unemployment policy on 1st Dec 2009. The policy had an initial exclusion of 120 days. Unfortunately their company has on the 3rd Feb. announced that they will be restructuring and as a result redundancies are likely. If the applicant was made redundant as a result of the restructuring NO benefit would be payable as the claim resulted from a change within the first 120 days of the policy starting.

Redundancy Insurance with NO Initial Exclusion

In certain circumstances providers may offer you redundancy insurance without any initial exclusion. If for example you are switching cover and are eligible for their switch terms. Or if your policy is taken out within 30 days of a new mortgage, re-mortgage, loan or rental agreement the provider may reduce it significantly or waive the initial exclusion completely so that your cover maybe active from day 1 depending of the wording on the policy. Therefore if you need to cover more than 25% of mortgage, rent and loan payments combined you could consider having two policies although you would need to ensure that cover does not overlap and that each provider is happy for you to have additional cover.

The initial exclusion terms offered does vary between policies, with the best policies stating that you should not be notified officially or unofficially of redundancy and the worst stating the above plus. Any unemployment which arises from any program of job losses, any departmental or company restructure, or merger with another company, announced by your employer before the start date of your policy, or within XX days after the start date of your policy. This type of cover should be avoided! Especially if you work in the public sector.

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Why Do I Need Unemployment or Sickness Protection?

If you have arranged you mortgage after Oct 1995 under current DWP regulations you would not be eligible for any mortgage interest support from the government for a period of 9 months. Those that are eligible the DWP will only pay the interest only element of your loan for the first £200,000 of your mortgage.

Recent changes announced in the emergency budget in June 2010 will also mean misery for thousands as the amount paid by the DWP is the lower of your actual mortgage rate or the Bank of England's Average Monthly Mortgage Rate currently set at 3.67% (see our blog for more info).

If your partner works more than 16 hours per week you are unlikely to get any financial support from the government.

Its easy to see how quickly you can get into financial difficulty, even when you do get support from the DWP they may not pay the full payment leaving you with arrears and charges and a black mark on your credit profile. The government safety net therefore has a lot of holes.

Protecting your mortgage payments and expenses should therefore be part of your protection requirements considering your far more likely to be made redundant or be off work though illness than you are to die.

Accident Sickness and Unemployment insurance cover has therefore been designed to provide you with temporary cover should you become ill have an accident or become unemployed as a result or redundancy and will normally pay the benefits for a claim period of 12-months.

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What is Not Usually Covered?

Accident Sickness and Unemployment Insurance does not usually cover any medical conditions you know about at the start of the policy. It will not cover every type of illness. You cannot normally claim for unemployment if you:-

  • Resign
  • Accept voluntary redundancy
  • Lose your job because of something you do that breaks the conditions of your employment contract
  • You get notification of redundancy within the initial exclusion period
  • Are still employed because you have another job

You usually have to have had the policy for a certain period of time before you can claim from 30 days to 180 days referred to as the (initial exclusion). It is therefore important you read the policy summary and the policy document to check exactly what is and is not covered.

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What You Need to do if You Are Made Unemployed / Redundant

As soon as you are made aware that you are to be made redundant contact the Job Centre for advice and to sign on as seeking work at the earliest opportunity. As most providers will not start processing your claim under unemployment insurance cover until you have registered as seeking employment with the job centre.

Cessation of Business Insurance (Unemployment Cover for the Self-employed)

For those who are self-employed or controlling directors you may obtain quality cover if your business totally cease trading as a result of circumstances beyond your control or of that or any partner/director. To claim you will need to notify HM Revenue and registered as unemployed with your local job centre and be getting national insurance credits. Not all cover for self-employed is the same as some policies will require your firm to go into involuntary liquidation in order to claim so talk to us and get a quote call 01872 277922.

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