Mortgage Cover from British Insurance
Mortgage cover can offer very important security for many homeowners as it can literally enable you to keep your home in the event of becoming unable to work due to accident, sickness or prolonged illness. Also known as mortgage payment protection insurance (MPPI for short), it is an insurance product that offers short-term benefits to the insured. The protection is designed to financially sustain people temporarily unemployed due to accident, illness, or involuntary redundancy. Payouts for the insurance are provided in instalments over a period of either 12 or 24 months, depending on the provider’s individual’s policy terms.
Mortgage cover is often sold by the high street banks and lenders in combination with mortgage products. It is an important protection for many homeowners who rely on their monthly income in order to meet their mortgage obligations. While the mortgage protection does not necessarily provide for replacement of full income, it does usually help homeowners meet their most important financial obligation.
Mortgage cover is actually one of three common types of insurance that fall under an umbrella of products known as payment protection insurance, or PPI for short. The other two are loan payment protection and income payment protection insurance. Each product offers similar core benefits as well as coverage for each of the standard events.
Loan payment cover, similar to the mortgage cover, is often sold in combination with loan products by banks and lenders. Its purpose is a bit broader, though, as it is intended to help cover the monthly debt obligations of the insured. As credit card and revolving debt continues to climb in Britain, people need protection to help meet monthly payment obligations when job income is lost. The protection does not replace all lost income, but it certainly can offset a good portion of it.
Income payment insurance is the third type of payment insurance protection. It is fairly simple to understand in terms of the purpose of the insurance. It is intended to assist through replacement of a good portion of the monthly income provided by the job. It does not replace 100 per cent of lost income, but it certainly helps consumers sustain themselves through short-term unemployment and will certainly be more than what is offered by the State.
There is some confusion that comes about with income payment cover, but it is mostly due to semantics. Income payment insurance and income protection are completely different insurance products. They are often referred to with similar names and terms, however, which creates some misunderstandings. Whereas income payment protection is similar to the other payment insurance products with its short-term nature, income protection offers more long-term protection. Its premiums are more expensive, but plans offer protection for some up until the age of retirement.
More and more consumers are starting to recognise the need to protect themselves for periods of being unable to work. Currently one in three homeowners has some type of payment cover. However, surveys show about 60 per cent of new homeowners are acquiring payment protection.
There are some other key reasons why homeowners are become more aware of payment protection and how to get it at a reasonable cost. Recently, the consumer organisation the Citizen’s Advice, filed a super complaint on behalf of consumers, with the Office of Fair Trading (OFT). In the complaint, the group alleged several common mis-selling practices were being used by leadings banks and High Street lenders.
Much of the complaint centered on practices related to packaging of insurance products with loan products. The group cited that many lenders used pressure tactics to make borrowers believe they had to buy insurance in order to receive their loan. More deceptively, some lenders did not directly address the premium costs with borrowers. They simply noted the insurance in the footnote of disclosures, and built the premium costs into the repayment of the loan. This was a way for them to hide the expensive costs of the insurance from unwitting borrowers.
An additional allegation tied to the complaint stated that many insurance sellers were selling plans to people ineligible to ever receive benefit payouts. Retired people, part time employees, and people with pre-existing medical conditions have all been targets of insurance sellers. None of these groups are eligible to collect payout from the insurance plans.
As a result of the complaint, the OFT and the Financial Services Authority (FSA) each conducted investigations of the payment protection industry. The FSA imposed several fines and sanctions on well known banks and High Street lenders. This has helped reduce some of the mis-selling practices as the institutions realise they are under intense consumer scrutiny now. The OFT appointed the Competition Commission to perform further research and is awaiting the results which should be available early in 2009 to decide what actions to take.
While institutional sellers have backed off some mis-selling techniques, consumer advocates are now warning of the same practices being used by some online lenders. More and more, homeowners are becoming aware of the advantages of working with independent insurance providers for their payment cover needs. Independent providers offer protection plans at rates 40 to 80 per cent cheaper than those offered by banks and High Street lenders. Historically, they tend to be more focused on providing a good experience as well as a good product for consumers, as opposed to manipulating them into buying the insurance.
Mortgage cover, loan payment protection insurance, and income payment cover all can offer invaluable protection for people who need to protect their loan and mortgage repayments or just their general income. Consumers need to be cautious when working with lenders to read fine print of disclosures and to ask questions about repayment expenses. Payment protection should be bought through responsible insurance sellers by empowered consumers.
get a quote for payment protection insurance