'COVERING MORTGAGES, LOANS AND RENT. UNEMPLOYMENT COVER FROM £2.35 per MONTH per £100' (Premiums will depend on individual circumstances)

This is a copy of ‘Take Cover for a Rainy Day’ issued by the Council of Mortgage Lenders Council of Mortgage Lenders 2009

How does MPPI work?

You pay a premium each month while the mortgage is running. If you become unemployed, or unable to work due to accident or sickness, the policy starts to pay out (usually direct to your lender) to pay your mortgage.

To keep the cost of the insurance down, there are some periods where you will not be covered (you should check the individual policy for exact details). The main ones are an ‘exclusion period’ of up to 180 days when you first take out your policy, during which any claim for unemployment would not be met and a period of up to 90 days during which any claim for accident or sickness would not be met. In addition, there is an ’excess’ or ’waiting’ period of up to 60 days for each claim, during which no payments will be made. So it makes sense to try to keep enough money in savings to cover two months worth of mortgage payments, even if you have an MPPI. There are some circumstances when MPPI will not cover you - for example, unemployment caused by misconduct, or that you knew was impending at the time you took out the insurance, or sickness claims caused by certain pre-existing conditions.

How does it work if I have a joint mortgage with someone else?

The MPPI can be set up so that it covers both of you, usually by allocating a proportion of the MPPI to each person (e.g. 50/50 or 60/40). If one person needs to claim, then the amount of the benefit payment will be the proportion of the MPPI allocated to that person. It is also possible to allocate the MPPI on a 100/100 basis, so that 100% of the MPPI is paid, even if only one of the joint borrowers loses their income. This type of arrangement will generally require higher premiums.

What if I am self employed or on a contract?

You will generally be able to take out MPPI even if you are self employed or on a contract. But make sure you check the details of the circumstances in which you can make an unemployment claim.

How do I buy MPPI?

If you are taking out a new mortgage, you will probably be offered MPPI by your lender or the intermediary arranging your mortgage. Unless the MPPI is part of a mortgage ‘package’, it is up to you whether you take the MPPI offered with the mortgage or to buy it from elsewhere. If you already have a mortgage, you may be able to buy MPPI from your lender, or through an insurance broker, or direct from an insurance company. MPPI is usually cheaper (and the terms may be more generous) if you take it out at the time you start your mortgage, rather than leaving it until you have had your mortgage running for a while.

What happens if I need to make a claim?

Your policy document will tell you how to claim. Usually, you need to obtain a claim form, complete it and send it to your insurer, together with some evidence (such as redundancy notice) to support your claim. If you take a temporary job, then provided you let your insurer know beforehand, you can interrupt a claim without having to pass the 60 day excess period again when your temporary employment ends.

What if I have a compliant?

You should first contact whoever sold you the policy, or the insurer. They will consider the complaint. If this does not resolve the problem, you can contact the Financial Ombudsman Service.