Borrowers pay too much for Mortgage Payment Protection Insurance
FINANCIAL ADVISER - 22ND APRIL 2004
Borrowers are being trapped in mortgage payment protection insurance policies that offer poor value, according to research.
A survey conducted by insurance broker Burgesses found many high street providers were charging well above the average for Mortgage Payment Protection Insurance
, also known as accident, sickness and unemployment cover.
Peter Colah an IFA for Surrey based Best Advice Financial Planning , said “You normally find mortgage lenders’ are not competitive and there are alternatives available outside those products. Most people would be better off taking out income protection and using that to pay the mortgage payments in the event of being unable to work.”
In addition, most lenders’ Mortgage Payment Protection Insurance policies have in-built pre-existing medical exclusion clauses that mean medical conditions that exist or have developed within 12 months of the policy commencing are excluded, according to Burgesses. The problem is exacerbated by the fact that the policies are not transferable between lenders.
This is in order for lenders to tie borrowers into financial arrangements that offer poor value for money, claimed Simon Burgess. Mr Burgess managing director of Burgesses, said pre-existing condition exclusions were unsatisfactory because policy holders were effectively underwritten at the point of claim.
