With payment protection insurance (PPI) having received so much coverage in recent years, some mortgage and financial specialists have expressed concern that people are wrongly believing mortgage payment protection insurance (MPPI) to be the same thing.
For some time, PPI was commonly added to bank loans and credit card accounts, but in many cases was mis-sold. Banks are now faced with paying out millions of pounds for reimbursing PPI payments, and a whole new industry has grown of firms that help people reclaim their PPI.
MPPI, however, is a very different service. It is designed to cover mortgage payments when long-term sickness or an accident prevents a person from working, acting as critical illness cover. It can also cover a person who is made redundant from their job. If mortgage payments are missed because the borrower cannot afford them, then their home could be at risk, but a typical MPPI policy will pay all or the majority of the monthly mortgage payments for up to two years.
Speaking about the situation, Louise Scott of the Yorkshire Building Society has said:
“We are concerned that the recent coverage around the mis-selling of PPI is misleading and even confusing some customers. As a lender we are anxious that some individuals will be put off purchasing protection insurance to help cover their mortgage – something that we feel is essential for homeowners to consider.”
The consumer organisation Which? recommends that homeowners with a mortgage should take out MPPI, but they need to find the best policy. An insurance broker can help choose the right one.
There are other providers of Payment Protection Insurance [Short-Term Income Protection] and other products designed to protect you against loss of income. For impartial information about insurance, please visit the website at www.moneyadviceservice.org.uk
The promotion should also provide an indication of the cost of PPI/MPPI to the Consumer, expressed in the format of the Monthly Cost for every £100 of Monthly Benefit for Accident, Sickness and Unemployment insurance, based on a 30-year-old male, a typical cost per £100 of cover would be £4.03 per month. This is based on a 30-day deferred period.