Pros + Cons of MPPI

You might be wary of mortgage payment protection insurance (MPPI) because you've heard that some of the more heartless of insurance agents have long been selling unnecessarily pricey policies to nervous and gullible homeowners. However, while it's true that there are some untrustworthy insurance agents out there, and while it's also true that not all policies are a good fit for certain homeowners, this doesn't mean that all MPPI policies are bad. In fact, MPPI policies can often come to the rescue when a homeowner unexpectedly loses his or her income.

Here's a closer look at the pros and cons of mortgage payment protection insurance.

The Pros

As already mentioned, MPPI policies prevent homes from being repossessed when homeowners find their income severely reduced. Other positive points to consider about MPPI plans include the following:

• Since the late 1990s, the government has become increasingly stringent on who can receive state benefits. With a recession in full swing, hundreds of thousands of people are rejected for state benefits each year. If you have MPPI cover, you do not have to worry about qualifying for state benefits should you become unable to work.
• Premiums vary depending upon how much cover you want. With a small mortgage, you could pay as little as £40 per month for your policy. In other words, your MPPI cover need not be unreasonably expensive.
• Typically, you will be automatically covered by your mortgage payment protection insurance if you experience an accident, an illness, or redundancy. By comparison, not all state schemes cover these three major causes for unemployment.

The Cons

This list of cons won't necessarily stop you from buying an MPPI policy, but they will help you know what to look for in a policy, and they will remind you to read everything in the fine print.

• There's always a deferment period before the policy begins to make payments. Sometimes the deferment policy is as long as four months – a long time if you don't have any savings to fall back on.
• In addition to the deferment period, most MPPI policies will only make payments for a total of twelve months. Some cheaper policies make payments for as little as three months.
• If you have an MPPI policy, you are automatically disqualified from certain state benefits.
• Certain individuals may have a difficult time receiving coverage. These individuals include:
  • The self-employed
  • Anyone near retirement age
  • Anyone employed less than six months at their current job
  • Part-time workers
  • Seasonal workers
• Additionally, if you leave your job voluntarily or you got sacked due to misconduct, you cannot receive payments.
• Not all diseases are covered by MPPI policies, and neither is pregnancy.

Should I Get an MPPI Policy?

By reading the pros and cons listed above, you may still be uncertain as to whether or not MPPI cover is worth the monthly premium. These additional facts about today's economic environment in Britain might help you make up your mind:

• 20% of households have at least one unemployed member
• 500 people become unemployed each day
• 90 families have their homes repossessed every day
• 33% of people between 25 – 34 have experienced unemployment for more than a month

Maybe you are not eligible for an MPPI policy, or maybe you have enough savings that you feel confident you don't need the extra help. However, if you are eligible to get coverage and you aren't confident that you could stay in your home if you lost your job, you should seriously consider your mortgage protection options.