Mortgage payment protection insurance
Mortgage Insurance from British Insurance
Mortgage insurance is a short-term insurance product that helps sustain someone temporarily displaced from work. There are typically three standard covered events that lead to a payment of benefits. Those are accident, illness, and involuntary redundancy. Benefits are paid out in monthly instalments over a period of 12 to 24 months, depending on the product offered by the provider. Mortgage protection is intended help people meet their monthly mortgage obligations in lieu of lost income.
Mortgage insurance does not always replace all of the covered person’s monthly income, but it does cover a significant amount. Many Brits rely on the protection to maintain their homes during the temporary period of unemployment or being unable to work. The mortgage protection is often sold in combination with mortgages by many lenders. This practice has been common amongst large banks and High Street lenders, which has led to some mis-selling practices at times.
Mortgage insurance, often referred to as mortgage payment protection insurance (MPPI), is actually part of an umbrella of insurance products known as payment protection insurance (PPI). Mortgage cover is one of the three common types of payment insurance. The other two types of payment protection are loan payment protection and income payment protection. The basic coverage and benefits offered by the three cover types are very similar. There are some slight differences, however, in the purposes of the protection and some features.
Loan payment insurance is very similar to mortgage protection, but its purpose is to help cover the monthly debt obligations of the insured, such as monthly loan or credit card repayments. Again, the protection does not always replace 100 per cent of monthly income, but it does cover a significant portion. Many Brits are able to supplement the income payment with additional savings funds or other funds to sustain themselves. As with the mortgage insurance, loan payment cover is regularly sold by many banks and lenders in combination with loan products.
Income payment cover is the third of the common payment insurance products. Its purpose is fairly easy to understand. The income payment support is intended to supplement the lost job income by providing assistance for a significant percentage of the normal monthly income. It does not replace all monthly income, but it certainly is a great support to many.
The challenge with income payment protection is that it is often confused with a completely different type of insurance, known as income protection. There reason for the confusion is simple, the covers have synonymous names and terms that are used in relation to each. The income payment protection insurance is part of the payment cover portfolio, which includes short-term benefits. Income protection is a longer term solution that offers a more expensive premium and its benefits are usually realised over a longer term, sometimes up until retirement age for the covered person.
Certainly, having some form of insurance in place like this can greatly relieve the stress of being without an income.and allows the policyholder to focus on getting new employment or recovering from their illness or injuries caused by an accident.
The payment protection industry has come under fire in recent years thanks to heightened consumer awareness about some common mis-selling techniques used by some banks and High Street lenders. Citizen’s Advice, a leading consumer advocate group, recently brought a super complaint to the Office of Fair Trading (OFT) on behalf of British consumers. Among their charges, the group pointed out some high pressure and deceptive selling techniques used by lenders to sell the payment cover to borrowers.
Some lenders pressure borrowers into believing payment insurance is needed to obtain their desired loan. Others go one step further by building payment protection premiums into the loan repayment to hide the high premium costs. Rather than communicate directly to customers that they are paying the premiums, some lenders make note of it in the fine print of disclosure documents. Unwitting borrowers end up paying huge amounts in insurance premiums without even realising it.
Along with these deceptive selling techniques, the super complaint also alleged that some insurance sellers were selling plans to Brits ineligible to ever receive benefits. Part time employees, retired people, and those with pre-existing medical conditions have all been targeted. These groups are not eligible for coverage, however, because the payment cover requires the insured is employed full time to receive benefits.
As a result of the complaint, the OFT and Financial Services Authority (FSA) each conducted investigations of the payment insurance industry. The FSA imposed several fines and sanctions on large banks and High Street lenders following their research. The OFT appointed the Competition Commission to further examine the selling practices going on in the industry. They are waiting for the results to decide what actions to take. Some banks and lenders have already backed off some selling practices because of the intense scrutiny. Consumer advocates are now warning Brits that some online lenders have picked up some of the same tactics.
The good new for Brits is that the heightened awareness has also shined a light on the benefits of an independent insurance broker. Independent insurance providers are providers that are focused on giving consumers the best plan and best rate available in the market. Their ability to offer the best plans is due to the relationships they maintain with many of the leading insurance providers in the industry. Insurance providers realise the increasing important of standalone providers and usually work through them to present their best products and rates for consumers.
Whether a consumer wants mortgage insurance, loan payment protection, or income payment protection, independent standalone providers offer rates that are 40 to 80 per cent cheaper than those offered by banks and High Street lenders. This makes their products a much better value. Standalone providers also tend to be more customer service oriented. Brits need to protect themselves during short-term periods of unemployment. The State bears little to no responsibility for assistance. It is up to individuals to protect themselves and their families with a low cost insurance plan.
