Mortgage cover insurance, also often known as 'mortgage protection insurance' or 'MPPI' is often the cause of some confusion. This article aims to answer the key questions about this type of cover and to explain how to find the best deal. Firstly, is mortgage cover insurance something that you need? The short answer is that there is no legal requirement to have a mortgage cover insurance policy when you take out a mortgage on a property, but it is a type of cover that is well worth considering.
For many people a mortgage is the largest financial commitment that they are ever going to experience. Therefore, it does make sense to protect your repayments in case you suffer an unexpected loss of income (for example, from getting injured or ill and being unable to work, or being made redundant). After all, there are a number of serious repercussions resulting from missed mortgage repayments, starting with a damaged credit rating and ending ultimately in repossession and eviction.
Also, some mortgage lenders may make mortgage cover insurance a condition of granting you a mortgage, because they would lose out significantly if you could not afford to repay your mortgage loan. One thing that your mortgage lender may not usually tell you though is that you are under absolutely no obligation to take out the cover through them. You have the right to get mortgage cover insurance through any provider that you choose. If you already have mortgage cover insurance cover through your lender and were not advised of this choice at the time, you may have been mis-sold your insurance and have grounds for a claim.
If you were to lose your job, a very real possibility in the current economic climate, have you considered how you would continue to meet your repayments? Some of those who are made redundant receive a generous package to reward them for their service, but if you are not so fortunate and receive the statutory minimum, this would be unlikely to help you to meet your financial commitments for long.
Mortgage cover insurance usually meets your mortgage payments for up to a year after you lose your income, so if your redundancy payout would cover you for this length of time, maybe the cover is not right for you. Likewise if you have savings that would mean you could meet the repayments comfortably whilst looking for alternative employment. Although mortgage cover insurance is not as expensive as some types of cover, it is nonetheless a regular commitment, so only take it out if you are a mortgage holder who feels that you are not currently sufficiently protected against loss of income.
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