Mortgage Payment Protection Insurance

Kerry Jonas asked:


 

If you’ve ever taken out a personal or secured loan, a mortgage, credit card or store card then you were probably sold Payment Protection Insurance (PPI) at the same time.  PPI is in theory a good idea.  It covers your repayments if you can’t work because you become ill or have an accident or if you are made redundant – provided you are in full time PAYE employment and meet certain conditions.   Most PPI policies won’t cover you for back pain or stress or if you’re on a short-term contract or self-employed.  Many will not pay out if an illness stopping you from working is linked to a “pre-existing medical condition”.

Even if you do qualify, PPI linked to mortgages, credit cards or store cards normally pay out for a limited amount of time (a year usually) and  some credit card PPI only covers the minimum monthly payment, meaning your balance may never reduce!  Most PPI policies only last for five years, so if your loan or finance agreement lasts longer than this, you’ll still be paying interest on insurance that has long since expired!

As well as being not quite as comprehensive as you thought, PPI is also expensive!   According to a recent Citizens Advice Bureau survey, PPI can add at least 20% or more to the cost of your credit (on average that’s an additional £2000-£3000 on a five year loan for £7,500.00) and since it’s estimated that there are over 20 million policies throughout the UK, that’s generating almost £5 billion worth of premium income for the insurers!   That same CAB survey found that 85% of people who had attempted to claim on their policies had been refused.  Worse still, in June 2008, the Competition Commission found that average insurance payout ratios were:

Car Insurance: 78% Home Insurance: 54% Mortgage PPI:  barely 28% Personal Loan PPI: a depressing 15% Credit Card PPI:  a pathetic 11%!

So how do you know if you’ve been mis-sold a PPI plan and what can you do about it?  The rules have been tightened up considerably in the last two years.  If you were sold PPI before 14th January 2005, most firms or advisers would be still covered by a code of practice set by the Association of British Insurers (ABI), the General insurance Standards Council (GISC) or the Finance and Leasing Association (FLA).  All three codes of practice required advisers to provide information at the time the insurance was taken out to help you decide if the policy was suitable for you.  Advisers and firms were (and are) required to cover those points.  There’s a good chance you were indeed mis-sold (and can therefore recover your hard earned cash) if you can answer ‘NO’ to one or more of these questions:

If the insurance was optional, was that made clear to you? Did the adviser tell you about any significant exclusions (especially pre-existing medical conditions) under the policy? Did the adviser make it clear you would have to pay for the insurance up front in one single payment and did you know you would be paying interest on it? If your loan or finance agreement was for longer than five years, did the adviser tell you that the insurance would run out before you had finished paying for your loan or finance agreement? Did the adviser tell you that you would continue to pay interest on the insurance premium, even after the insurance had expired?

So if you think you may have been mis-sold PPI and want to recover those additional charges and costs, contact us today to find out more and take action! Visit http://www.CreditIssuesUK.co.uk and take the two minute test and find out if you qualify.



Miles

SeanHorton asked:


Mortgage Payment Protection Insurance or MPPI for short is a product designed to pay your monthly mortgage repayment, if you are unable to do so. It is an insurance product designed to keep the roof over your head, during a period when your earned income ceases, due to accident, sickness or redundancy.

An illness or redundancy can strike at any time and without warning. By having an MPPI policy in place you have increased peace of mind that should the worst happen you have some breathing space to get things back on track.

A typical MPPI policy will pay up to twelve months mortgage payments in the event of a valid claim, some with no deferred period, therefore offering you “back to day one cover”. Not all mortgage payment protection insurance policies offer back to day one day one cover so if this aspect is important to you then check the policy before buying. With back to day one cover you will generally need to be off work for 30 days, after this the insurance company will back date your initial payment to the first day of the claim. After this payments will be made monthly in arrears.

The policy will pay, for up to 12 months or your earlier return to work; whichever is sooner. Some Mortgage Payment Protection policies will not only cover your monthly mortgage costs, but give you an extra percentage towards other household costs, for instance like life insurance or other mortgage related insurances.

The level of cover you can choose under these policies differs from each provider. Most will allow £1500 per month with some going as high as £3,000 per month. This figure includes the actual mortgage payment and any additional insurance policy premiums you want to protect against accident, sickness or unemployment.

It is estimated that 20-24% of mortgage payers have Mortgage Payment Protection Insurance, unfortunately sold heavily through their mortgage lenders. The lenders find these products an easy “bolt on” to the mortgage sale; well who wouldn’t purchase a product that good from a Bank or Building Society? Well if you are smart, you would not. The lenders like to sell these heavily commission loaded, generally inferior products at the point of sale, at a time when your mind is on other things.

People forget the golden rule; spend time shopping around before buying.

It gets worse though; the lenders get to make a packet from you on the sale of an overpriced the MPPI policy, whilst simultaneously reducing their exposure to risk. Why? They are involved in a clever cost containment exercise by selling you a policy to make sure that you do not go into arrears with them! Brilliant idea.

Don’t fall for it; get on the internet, and pick up a quality Mortgage Payment Protection Insurance for a good price from a respectable provider. There are some excellent MPPI policies to choose from with some having received a 5 star rating from Defaqto, this means they provide excellent cover at competitive costs.



Landin

Simon Christopher asked:


So, you’ve done your home work and found the best mortgage for you with a great rate that should save you money. This is where many borrowers let their guard down and end up paying way over the odds for insurance sold to them by their new lender.

Whilst, Mortgage Payment Protection Insurance can be a financial life saver should you be unable to work through illness, injury or even redundancy, some borrowers are paying a significant proportion of their monthly payment to the lender in insurance premiums.

Mortgage Payment Protection Insurance or MPPI for short is a protection plan for mortgages which helps you to make your repayments for a specified period of time should you lose your job or fall ill so that you are unable to work. This ensures that you do not lose your home or your property, and can pick up pretty much where you left off when you have recovered.

It seems pretty obvious that if you can afford the monthly premiums, this cover can be a good investment in your financial future should the worst strike, which is why we insure anything anyway. Whilst MPPI is not compulsory, it can certainly come in handy and help you through the rough times and even help you to keep your home. Before you head to your lender to sign up, though, there is something that you should know.

Lenders are not obligated to tell you that you can buy mortgage payment protection from many different sources including the internet. Without this vital bit of information, many consumers buy this cover unaware that they can potentially save themselves thousands of pounds over the term of a mortgage. Of course, at the time, most applicants are so focused on being granted the mortgage they pay far less attention to the value of any related insurance they are offered.

Therefore, buying MPPI from your lender can mean a lot of wasted money that could easily be saved by shopping around for cover from other providers. In such a competitive market, many insurance companies offer payment protection plans to help cover your mortgage and will often be able to provide premium rates that are significantly lower than those offered by mortgage lenders for exactly the same or even better cover.

So, do not let your mortgage lender fast talk you into signing up for a payment protection plan that you do not have to buy from them. The commissions these policies can pay are often significant which can mean you receive a very well motivated sales pitch. Hold your ground and politely tell them that you will consider it, and remember to explore your options by using a broker or by comparing companies on the internet. You are almost certain to find a company or two that satisfies your requirements with nothing more than a simple internet search. Just be sure to know what you need, read the small print and take advice from an independent expert if you are unsure.



Osvaldo