Mortgage Payment Protection

Mortgage payment protection insurance is a valuable form of cover chosen by many homeowners who have taken out a mortgage loan in order to acquire a property. When you purchase a home on a loan, you are making a tremendous financial investment. Choosing to buy a property is an exciting venture, but it is not without risk. If you suddenly become ill or injured, you may not be able to continue working and may be forced to default on your loan payment. As you know, defaulting on a payment can lead to home foreclosure. Unfortunately, many homeowners in the United Kingdom have been faced with this difficult reality. Choosing not to compare mortgage costs or invest in a mortgage payment protection policy could result in losing your home.

How Mortgage Payment Insurance Works

After you have applied for a mortgage and a lender has accepted your application, you are going to be offered a wide range of protection plans. Generally, lenders require borrowers to purchase mortgage insurance (MI), which is often confused with mortgage payment protection insurance (MPPI). MI is a form of life cover that pays the remainder of a borrower's loan if they pass away. Mortgage payment protection insurance, however, is not compulsory. Often, people confuse the two and end up purchasing cover they are not required to have.

If you accept mortgage payment protection insurance, then you will pay your premiums in one of two ways. You may choose to pay your premiums monthly, and this payment is often included along with your loan payment. Instead of paying monthly, you may invest in a single premium policy. If you choose this option, the cost of the plan is borrowed from the lender along with the loan and accrues interest along with the mortgage.

If you become injured, ill or unemployed and can no longer make payments, then you must file a claim to your provider. If your claim is accepted, then your provider will cover your payment for a predetermined length of time - generally 12 months. When this period of time was lapsed, your provider will cease making payments and, if you cannot afford to make payments on your own, you must seek alternative sources or face foreclosure.

Advantages and Disadvantages of MPPI

There are many reasons why mortgage payment protection insurance is a wise investment. Conversely, there are also many reasons why a homeowner may choose not to accept this protection. One of the main reasons people invest in this sort of protection is because having protection for such a major investment can be comforting. The future is uncertain and you never know when you may face a serious injury or illness that prevents you from attending work or making enough money to cover your bills. Having a plan in place to make your payments while you are on the mend can provide excellent peace of mind and reduce unemployment stresses.

Many people choose not to purchase mortgage payment protection insurance because they assume they can supplement any income with their statutory sick pay and state benefits. However, often these programs do not pay out enough to cover all of one's bills. One of the disadvantages of MPPI is that, once your cover period has expired, you must find other means of paying your bills. At this time, you may be eligible for statutory sick pay, which should provide a payout until you reach state pension age. However, having mortgage protection insurance can give you an opportunity to locate alternative means of making payments.

Claim Approval and Denial

Just because you have invested in mortgage payment protection insurance does not guarantee that you will receive a payout. Before you will be provided any money, you must file a claim. Generally, your provider will have a claims hotline in order to make the process as smooth as possible. You must be able to provide your name, date of the last day you worked, your National Insurance number, your employer's contact information and your employee history for the previous six months.

Once you have submitted all of the necessary information, your provider will review your claim. The amount of time it takes a company to review your claim varies, and depends greatly on the severity of your need. Because plans often have a wide range of exclusions, you should be sure to review your key facts document to ensure your claim is even valid. If not, you can expect to be denied. Common exclusions include retirement, voluntary unemployment, self inflicted injury or injuries that are not serious enough to prevent a policy holder from working. Also, many providers have an initial exclusionary period that may last as long as four months or more. Before you accept mortgage payment protection, be sure to read the details so you can decide whether the protection is worth the cost.