Mortgage PPI Tips
Consumer confidence in the UK mortgage market has suffered since the Northern Rock crisis began, while interest rates are at a six year high of 5.5%. As a result Protection Specialists LifeSearch has seen a significant increase in mortgage related protection enquiries, including redundancy.
It is difficult for consumers to pick their way through all the options available to them so LifeSearch have come up with 5 top tips for homeowners to protect the mortgage throughout the current uncertainty and give themselves peace of mind.
1. Do something!
It sounds obvious but many people would rather put off making a tough decision. It is important to always shop around and be careful not to trust your bank or any other tied source to provide the best price or advice. High Street mortgage lenders, banks and non-advisers are usually tied to just one provider and can be very expensive. Make sure to either contact a range of companies or speak to an independent broker who can search the market for you. Remember that no one insurance company can ever be suitable for everyone.
2. Don’t buy MPPI without considering Income Protection
In comparison with Income Protection (IP) policies, Mortgage Payment Protection Insurance (MPPI) plans can be greatly inferior and may even cost you more, particularly if you are young and healthy. Typically, MPPI will only pay out for one year, includes a number of important exclusions and both the premiums and the conditions of the policy can be changed at short notice. Another advantage of IP is that it protects your salary rather than just your mortgage repayments. After all, there’s little point taking out a policy that protects the mortgage repayments if you can’t afford to actually live in the house. IP enables you to pay the mortgage as well as all the other daily costs of living, potentially until you retire, not just for one year. If you are particularly worried about redundancy, Unemployment Cover or Waiver of Premium can be added to an IP policy at extra cost.
3. Check your employee benefits
If you receive income protection through your employer there is little point taking out a personal policy as you will not be able to claim twice. However, if you do not receive benefits, or are self-employed, it is important to look into your protection options as soon as possible. Do not rely on death in service cover as your career could change in future and you may lose this benefit.
4. Don’t borrow more than you can afford
It sounds obvious but many people take out a mortgage that is right at the limit of their budget. If you can’t afford to protect the mortgage against financial difficulty, can you really afford the loan? Income Protection is typically the recommended policy for people who need to cover a mortgage while simultaneously protecting their cost of daily living too.
5. Seek independent advice before buying
Deciding what type of insurance to buy, how much to buy and what options to choose is not simple. In fact, it can be highly complex, and we encourage consumers to read the Which? insurance fact sheet before buying, who strongly recommend that advice is taken for Income Protection, Mortgage Protection, Critical Illness, Life Insurance and Payment Protection Insurance. You may already have some form of cover, such as Life Cover, but is it the best policy for your individual needs? An adviser will be able to tell you. However, never cancel an existing policy until you have a new one in place.
Matt Morris, LifeSearch Policy Adviser, says: “Many people consider protecting their mortgage, but they usually select a policy that will pay it for them when they can’t work. What they actually should be protecting is their income, which not only pays the mortgage, but also pays all the other bills and the everyday cost of living. Death is the least likely event to occur, it’s more likely an illness will stop you from working, which is why income protection should be the first policy people consider when protecting their mortgage.”
Tags: ppi compensation, ppi claim