FreeFirst MPPI - a short explanation
- 19TH SEPTEMBER 2007
Freefirst MPPI insurance policy provides cover in the event that you are unable to work due to accident or sickness or you suffer involuntary unemployment. Benefits, which you set at a pre-agreed level, are there to cover your regular monthly mortgage outgoings for up to a maximum benefit period of 12 months.
Freefirst MPPI policy also has the advantage that you can take out cover for,
• Being unable to work due to accident and sickness and suffering involuntary unemployment combined, or
• Just being unable to work due to accident and sickness, or
• Just suffering involuntary unemployment.
The choice is yours. This can be a useful factor if you think that one section of the cover may duplicate other arrangements you have or is not suitable. If your budget is really tight then you can select one section of cover only as an aid to reduce premium cost.
The mortgage payment protection insurance product is also competitively priced. If you take out only cover for being unable to work due to accident or sickness then the premium rate is £1.95 per £100 of monthly benefit selected. If you choose to cover only involuntary unemployment then the cost is the same. If however you select to insure both sections of cover then the price is £2.95 per £100 of monthly benefit. Check out similar products offered by high street lenders and the likelihood is that you will find that this product will come out very well in any comparison and could easily show savings of 50% or more on price. Over the period of a mortgage that saving can add up to a reasonable figure.
In addition the first three months of cover is free with no premium charged.
There is a straight forward application process with a set flat premium rate varied only by the choice of cover you choose and the level of monthly benefit you choose. There are no complicated premium calculations based on gender, smoking habits, occupation or age. There is also no medical required.
Monthly benefits do not start to be paid until you have been off work or unemployed for 61 days. The 61 days is counted from when you first become eligible to claim. The benefits continue to be paid until either your claim ends or the maximum benefit period is reached (which can be up to 12 months in most cases) which ever is the sooner.
Being unable to work and earn an income or being made involuntary unemployed is something that none of us want to happen, but very few of us will go through life without that experience. We all hope that if anything like that happens then we will have sufficient resources to weather the storm. But unfortunately that is not always the case.
There are state benefits but those are subject to assessment. If your partner is in full time employment or you have savings in excess of £8,000 then you are unlikely to qualify to receive state help with your monthly mortgage payments. Even if you do qualify then the state will only help with interest payments (not the capital repayment) and only for the interested related to the first £100,000 of mortgage. If your mortgage was taken out after October 1995 then assistance will not be available for the first nine months.
You should check out what benefits your employer may provide under the employment contract as there may be some help there or you may feel you can rely on savings, friends and family.
However if you would prefer to take out some insurance protection then under Freefirst MPPI cover you can select a monthly benefit limit that does not exceed the combined total of 125% of your monthly mortgage payment plus related home and life insurance premiums or £1,500 or up to 75% of your average monthly income which ever of those figures is the lowest.
Please note that the maximum benefit period for the payment protection insurance is 12 months and for long illnesses or permanent disability that may not be long enough. There are insurance policies called income protection which can provide much longer benefit periods. Those policies do not include cover for involuntary unemployment and also are much more expensive due to the longer benefit period.
No insurance is perfect and Freefirst MPPI cover does have exclusions as do all insurance policies. A précis of the cover and main exclusions are contained in the policy summary and the full policy wording is also available for review.
Examples of the exclusions are pre-existing medical conditions that existed within the 12 months prior to the start of the cover unless in the event of a claim those same medical conditions had not reoccurred for the immediate previous 24 months prior to the date fo claim.
Unemployment cover for the self employed is also subject to more stringent rules and to claim involuntary unemployment your business has to have ceased trading completely.
What ever decision you make you are always advised to shop around and to fully read the policy summary or policy wording.
