Guide to mortgage payment protection insurance:

What is mortgage payment protection insurance (MPPI)?

Mortgage Payment Protection Insurance (MPPI) pays your monthly mortgage payments for a specified period if you suffer accident, sickness, or unemployment. Lenders and insurers have agreed to adopt certain minimum standards for mortgage payment protection insurance, so you can be confident that the level of cover you will be offered meets or exceeds these.

What if I am self-employed or on a contract?

You will generally be able to take out mortgage payment protection insurance 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 mortgage payment protection insurance?

If you are taking out a new mortgage, you will probably be offered mortgage payment protection insurance by your lender or the intermediary arranging your mortgage. Unless the mortgage payment protection insurance is part of a mortgage "package", it is up to you whether you take the mortgage payment protection insurance offered with the mortgage or to buy it from elsewhere. if you already have a mortgage, you may be able to buy mortgage payment protection insurance from your lender, or through an insurance broker, or direct from an insurance company. Mortgage payment protection insurance 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 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 a 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 complaint?

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 independent Insurance Ombudsman Bureau.

Check it out!

Most people should consider taking out full mortgage payment protection insurance, covering the full amount of the mortgage payments following accident, sickness or unemployment, and this is what you will generally be offered in the first instance. But if you already have other cover - such as accident or sickness cover from your employer, Income Protection or Critical Illness insurance or substantial levels of savings - you may decide that you do not need the full level of mortgage payment protection insurance. If so, you may decide to "top up" your existing cover (perhaps by taking out the unemployment-only element of mortgage payment protection insurance), or you may decide that you do not wish to take out mortgage payment protection insurance at all. But be very careful that you are not being over- optimistic about your ability to meet your mortgage and other commitments if you decide not to take out mortgage payment protection insurance. If you decide not to take out mortgage payment protection insurance cover, your lender or intermediary may ask you to sign our confirmation that this is the decision you have reached, after considering all the Circumstances. Signing this confirmation will not affect the willingness of your lender to try to help you if you do not take out mortgage payment protection insurance and subsequently fall into arrears with your mortgage repayments at a later date. However, if you have mortgage payment protection insurance or some other form of protection, both you and your lender will have greater scope for dealing with payment difficulties. This guide has explained only the very basic provisions of mortgage payment protection insurance. For further information, contact your mortgage adviser. Remember – no one expects the worst to happen when they take out a mortgage, but how would you cope if it did? Don’t risk losing your home - protect your mortgage repayments.

Other useful information

The Association of British Insurers provides other leaflets and information on insurance. These are available on its website at http://www.abi.org.uk or by writing to Association of British Insurers, 51 Gresham Street, London EC2V 7HQ. The Council of Mortgage Lenders provides other leaflets and information on mortgages. These are available from the CML’s enquiry line on 0171 440 2255.

The Benefits Agency has leaflets and information on welfare benefits (including Income Support and Jobseeker’s Allowance). A specific leaflet on mortgage payment protection insurance titled Protecting Your Mortgage (Ref No: IS800) is available. You can find the address and phone number of your local office in the local telephone directory.