General explanation of FreeFirst Mortgage Payment Protection Insurance
- 9TH SEPTEMBER 2007
This mortgage payment protection policy (MPPI) offers customers the first three months of cover free of any premium charge. There are no hidden catches and the cover can be cancelled without penalty. The premiums, when they do become due to be paid are paid on a monthly basis in advance by direct debit. Again even when you start to pay premiums you can cancel at any time simply by making a written request to do so. The premiums are also competitive and you can easily check this out if you compare these prices with others available in the market place.
So what does the policy do?
FreeFirst provides mortgage payers with the chance to insure their monthly mortgage repayments (capital and interest) plus related life and house hold insurance plus an extra 25% to cover possible mortgage rate increases and general costs. The policy provides cover for involuntary unemployment and accident and sickness either of which totally prevents you from being able to work. The benefits can be paid for up to a maximum period of 12 months provided you are still not working and are still eligible to claim.
The maximum level of cover you can purchase is £1,500 or 75% of your monthly income whichever is the lesser amount. The policy differs from some other MPPI policies in that it will allow more than one person to insure under the policy where those extra people are also paying the same mortgage.
Premiums are based on the monthly benefit level selected and the scope of cover selected.
If an eligible claim occurs then the pre-agreed benefit (provided it does not exceed the maximum allowed amount) is paid 61 days after the insured claiming was registered and signed on as unemployed or was confirmed by a doctor to be unable to work due to accident or sickness. In cases where the claim results from stress-related conditions or back ache confirmation of the ability to claim will usually have to be made by a specialist in that field and the condition attributed to a specific cause.
Benefit payments can continue for up to 12 months provided the insured remains eligible to claim and is unable to return to work due to disablement or remains unemployed and does not find new employment. During a claim you must also continue to pay the monthly premium so that the policy remains in force.
Mortgage payment protection insurance Cover continues provided that you continue to pay the premium or until you become ineligible for cover for example you decide to retire early or you reach the age of 65. Equally you can choose to cancel the cover at any time. The insurer also has the option to cancel the cover or change the cover terms. The insurer needs to give you 90 days notice if they are going to change the cover terms or offer alternative cover and 30 days notice if they are unable to continue to offer any cover. Claims occurring before cancellation date will not be affected.
So what is the price?
All premiums are collected by direct debit monthly in advance. But please note that the first three months of cover is free.
The premiums for mortgage payment protection insurance are set at £2.95 per £100 of monthly benefit if you select to insure both involuntary unemployment and being disabled from work due to accident and sickness. If you select just to insurer only involuntary unemployment or only cover for being disable from working due to accident and sickness on its own then the cost reduces to £1.95 per £100 of monthly benefit. So for the full cover option of involuntary unemployment and being disabled from work due to accident and sickness a monthly benefit of £1,000 would cost £29.50 per month.
You can compare that figure with what is available from some of the well know high street lenders and if you do that comparison we think you will be pleasantly surprised at how much you could save. We have heard of savings of 50% or more. We would always suggest you shop around. Do not just take our word, check for yourself and remember that there should be no commitment for you to purchase MPPI cover from your mortgage lender.
The insurer does not take into account age, smoking habits, occupation, gender when considering how much to charge.
So who is eligible to purchase FreeFirst.
This is only a guideline and you need to read the policy summary and policy wording for full details.
You need to be aged between 18 and 64, work for at least 16 hours a week in a business situated in the UK and you need to permanently live in the UK. The policy must protect a mortgage on a private residential property where you live and where you are personally named on the mortgage, paying the mortgage and not acting as guarantor for the mortgage.
You are not eligible if you work for a temporary employment agency, you do seasonal work, casual work or temporary work. You are not eligible if unemployment is a regular or reoccurring feature of your job.
You are not eligible if you are currently unable to work due to disability (but you would not be regarded as being disabled simply because you were on maternity leave, paternity leave, adoption or parental leave).
So no cover is perfect.
Every insurance policy has exclusions and limitations. We list some downsides to the FreeFirst cover that you might want to know about. Please check the policy wording for full details.
The benefits can only run to a maximum period of 12 months. That period of protection may cover most events but not every event. Accidents or illness that produce permanent disability may stop you from working for a longer period or perhaps result in you being permanently disabled from working. If you are concerned over the 12 month maximum limitation on benefit period then you might want to consider income protection insurance. The cost is dearer and it does not cover unemployment but cover for much longer benefit periods are available.
The accident and sickness cover excludes any medical condition which is chronic or for which you have sought treatment, consultation or advice in the 12 months prior to the policy starting. This exclusion can be waived if you did not suffer or did not seek advice, treatment or consultation for the 24 months immediately preceding any claim so long as the medical condition is not chronic.
Involuntary unemployment is more difficult to claim for those who are defined as self employed under the policy. For the self employed the cover will only pay out under involuntary unemployment if the business is forced to shut down for reasons beyond the control of the insured, a partner or director and the business permanently ceases to trade.
The policy only covers involuntary unemployment so things like taking early retirement, voluntary redundancy or if you refuse a reasonable offer of alternative employment if their employer offers it.
Contract workers and those who work on a sub-contracted basis do not receive full policy benefits unless that have at least 12 months continuous service with the same employer they are now with.
If you were aware or knew of any possible future unemployment or disability before the start date then that would not be covered.
If the insurance is to cover an existing mortgage (one that has already been in place for more than 30 days at the policy start date) then you will have to go through a waiting period (called an exclusion period) before unemployment cover becomes effective. That period is three months and you will not be covered for any involuntary unemployment notified during that period of which you become aware of during that period.
You must have been in continuous employment and continuously working for six months before the date of your first claim. Those six months of continuous work could be immediately before the policy start date.
Casual workers, temporary workers and those working for a temporary employment agency are not eligible for cover or to claim.
You are not covered if unemployment is a regular feature of your job.
Claims are excluded if you are made unemployed and that resulted from disciplinary action against you for misconduct, dishonesty, fraud or failure by you to meet any performance standards or targets.
Self inflicted injuries, alcohol or drug abuse or failure to follow medical advice is excluded.
Overall.
Many people believe that MPPI insurance (not just FreeFirst) represents value for money because is offers protection against one of their largest regular financial commitments and it also fits more easily into a tight budget.
We can not foretell whether we will be made unemployed or whether we will suffer accident or sickness. Monthly mortgage repayments are a large expenditure and if we do not keep up with them then our home may be at risk. No one wants that.
There is some state help and you might wish to check where you might stand on that. This is a general comment and you should check for yourself but usually if you have savings over £8,000 or your partner is in full time work you will not get assistance with monthly mortgage payments. State benefit when it is provided will only deal with the interest part of any monthly mortgage payment and not the repayment of capital. Help is usually only given on the first amount of the mortgage up to £100,000. If the mortgage was taken out after October 1995 then assistance is usually not available for the first nine months.
You should also look at what benefits and provision your employer may provide. Your employment contract may allow for several months pay even if you are disabled from working. Your employer may provide permanent health insurance. There may be a good redundancy package written into your employment contract. These factors may affect your choice over the sections of cover you choose.
You may have savings which you would be willing to draw down on in the event of a problem. You may have family and friends who would help.
Complaints procedure.
If you are dissatisfied with the insurance intermediary who introduced you to the insurance then you can complain direct to them. If you are dissatisfied with the insurance policy or any claims service then you can complain to the insurer or the administrator acting on their behalf.
You may alternative prefer simply to cancel the cover without penalty but please do not cancel if you are in the process of making a claim or in the middle of a claim.
If your complaint can not be resolved then you may be entitled to take the matter to the Financial Ombudsman’s Service. That is an independent body financed through charges allocated to the insurance market and set up by the government to give consumers a fair deal.
