Mortgage Payment Protection Insurance: What You Need to Know

For most people, taking out a mortgage is one of the biggest financial decisions they could ever make in their lives. Not only is this loan possibly the largest sum of money they will ever take out, there is also the risk of having the house repossessed because they are unable to pay back their debts. Mortgage payment protection insurance serves to protect policyholders from falling under foreclosure, allowing you and your loved ones to keep your home. Mortgage payment protection insurance, otherwise known as otherwise known as MPPI or MPI, is a type of insurance that covers mortgage payments in the event of injury, unemployment, disability, or death of the policyholder.  

While the policies may be different in the nitty-gritty details, they essentially have the same clauses in terms of how much coverage they provide: the insurance company will be paying for the loan for only up to a certain period in cases of injury, disability, or unemployment, while they will pay the outstanding debt in case of death. Mortgage payment protection is attractive to people who are not qualified for other kinds of disability and/or life insurance policies, since this is usually granted without requiring the applicant to go through a physical applicant as part of the application evaluation.

Like other types of insurance, MPPI follows a list of eligibility criteria in order to see who actually are qualified for coverage. This includes that the person must be 18 to 65 years old at the time of loan application, is a permanent resident of the area covered by the insurance company, actively working at the time of application and has been continuously employed for at least six months prior to the start date of the insurance policy, and the one who took out the mortgage in the first place.

He or she must also be aware of any impending unemployment or disability that can affect his or her financial circumstances. People who are in casual, temporary, or seasonal employment or are retired are automatically disqualified from being covered by the MPPI, as well as people who are beyond the age requirement set by the criteria. The other exclusions that may be included in policies are disabilities due to a pre-existing condition, defined as a condition or disease of which the applicant sought treatment or advice for within 12 months prior to the start date of the policy, dismissal from the job due to misconduct or breach of contract, pregnancy, self-inflicted injuries, substance abuse, and attempted suicide.

In the unfortunate event that you end up unemployed, injured, or disabled, you can make your claim by calling the insurance company. However, they might ask you to prove that you are unable to earn your income by not being able to go to work due to your circumstances.

When buying your mortgage protection insurance policy, make sure that it provides coverage for every factor that you are concerned with. Furthermore, make sure that you are actually qualified for coverage. Payment protection insurance (PPI) policies, like MPPI, remains the mis-sold type of insurance nowadays, so make sure you read the whole policy and the small print before you sign on the dotted line. Ask the different insurance providers and shop around so that you will be able to get the best policy that they are offering. Remember: PPI generally charges the highest premiums, so you would do well to examine the different policies before choosing which one to get.

You may also want to consider other kinds of insurance that offer mortgage protection, such as life insurance, as these have a wider coverage than MPPI.