Your Industry  

What MPPI covers and how it works

Mortgage Payment Protection Insurance can keep paying a mortgage if the policyholder is unable to work because of an accident, sickness or if the individual becomes unemployed through redundancy.

MPPI is designed to cover a customer’s mortgage payments and some policies also cover related insurance premiums.

Certain MPPI policies, according to Tim Johnson, chief executive of Paymentshield, may also provide additional cover to help with other household costs such as council tax and utility bills.

Article continues after advert

Some policies may additionally provide additional support, such as legal assistance, medical helplines and advice on CV writing and interview technique, all of which are designed to support the customer during their time off and ease the transition back into employment.

Mr Johnson says the variety of cover offered by MPPI policies means it is vital advisers grasp exactly what needs to be protected for any given client.

He says: “It is important to remember, though, that if a customer is looking to cover a wide range of additional outgoings other forms of protection such as short term income protection may be more appropriate.”

There are usually three cover options under MPPI, according to Mr Johnson:

1) Accident, sickness and unemployment

2) Accident and sickness only

3) Unemployment only

MPPI is designed to pay a set amount of money, usually determined by the policyholder, each month until he or she returns to work, or until the end of a fixed period - typically 12 months.

Ben Heffer, insight analyst for life and protection at Defaqto, says pricing is usually based on a set amount per month for each £100 per month of cover.

As of September 2013, Mr Heffer says there are 54 different MPPI policies on the market from 42 providers. Half of these deals are available through intermediaries and half are direct distribution products.

Mr Heffer says all providers covered accident and sickness (AS) - and all except one also cover unemployment (U), either separately or in combination with accident and sickness cover (ASU).

He says: “Most policies allow the policyholder to choose ASU, AS or U; some offer a choice of just ASU or AS.

“The majority of policies offer a 12-month benefit payment period; a small number (just 10) offer a choice of benefit payment period, for example 12 or 24 months, or 12 or six months.

“Most products offer a choice of excess periods, typically 30, 60, 90 days (plus others) and almost all offer 30 days. The longer the excess period the cheaper the cover - but you should bear in mind when the first payment is due.

“A policy with an excess period of 30 days and monthly paid benefit means that the first payment will not be made until day 61. Back to day one cover is available on 68 per cent of policies either as an option or as standard.”