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Who should have MPPI - and why some may not need full cover

This article is part of
Guide to Mortgage Payment Protection Insurance

Every homeowner should consider MPPI, according to Tim Johnson, chief executive of Paymentshield.

Mr Johnson said: “The inability to work through accident, sickness or unemployment can affect anyone at anytime and cause a great deal of stress and anxiety.

“Knowing that mortgage repayments are covered can at least take some of the financial pressure off during convalescence or while trying to find alternative employment.

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“Most policies will have a minimum number of hours the policyholder will need to work to be eligible for cover, such as working a minimum of 16 hours a week.”

Clients with mortgages or other financial commitments should always consider how they would service those commitments in the event that they were unable to work due to accident, sickness or unemployment, Ben Heffer, insight analyst for life and protection at Defaqto, points out.

MPPI is specifically designed to meet this need, but Mr Heffer says MPPI is not the only option and advisers should talk to their clients about the range of options available to them, such as income protection.

In a consumer guide, the Council of Mortgage Lenders argues most people should consider taking out full MPPI and make sure it covers the full amount of the mortgage payments following accident, sickness or unemployment.

Even those who are self-employed or on a contract should be able to take out MPPI, the CML argues. However it does warn those who are self-employed or on a contract to make sure they check the details of the circumstances in which they can make an unemployment claim.

The CML points out that full MPPI is what will generally be offered to most people taking out a mortgage.

But if your client already has other cover – perhaps accident or sickness cover from their employer, income protection or critical illness insurance, or substantial levels of savings - they may decide they do not need the full level of MPPI insurance.

If they do not want full MPPI cover, the CML points out they could still decide to “top up” their existing cover or only use part of the options offered by these policies. Perhaps clients could take out the unemployment-only element of MPPI, the CML suggest.

But the CML warns advisers should encourage their clients to be very careful and make sure they are not being overly optimistic about their ability to meet mortgage and other financial commitments if they decide not to take out any MPPI.

According to the CML, if a client decides not to take out MPPI cover, the lender or intermediary could ask them to sign confirmation that this is the decision they have reached, ignoring any advice given, after considering their personal circumstances.