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Mortgage protection

Mortgage protection, otherwise known as mortgage payment protection insurance (MPPI), is a product designed to pay your mortgage repayments in the event that you lose your regular income. There are a variety of different types of mortgage protection insurance on the market, and they will all have different conditions within them.

This type of insurance is not compulsory, although some loan providers will give better rates and deals if you have this protection, and it is definitely worth considering, particularly if your mortgage payments are a bit of a stretch.

Accident or Sickness
Some MPPI policies are geared towards providing cover when the insured looses an income due to becoming so badly injured or ill that they are unable to work. There is a deferred period built in – the amount of time that the insured wishes to wait for before they start receiving benefit.

It may seem like a good idea to just start receiving benefit from day 1 of the incapacity, but there are a couple of things to consider. The first of these is the fact that most people, unless self-employed, will have some sort of sick pay from their employer that will last for a certain period of time. It makes sense then, to defer the payment of benefit until the period after your employer stops paying you. And the reason for this, and the second thing to consider is that, the longer you defer the benefit period, the cheaper the insurance will be. In a nutshell there should be a trade-off between keeping the premiums down, and making sure you are covered by either the policy or your employer, meaning you always have some sort of income.

Accident, Sickness and Unemployment
This is the other type of MPPI policy. Most of the time this insurance will have all of the benefits of the accident and sickness policy, plus it will also pay out if you lose your job. However it will not cover you if you lose your job through resigning, taking voluntary redundancy or are dismissed due to misconduct. The policy may also refuse to pay out if you are made redundant within the first 60 days of taking it out, and is likely to be more costly than accident and sickness cover.

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