Personal Touch Financial

The Ins and Outs of Mortgage Protection Life Insurance

Mortgage protection life insurance is a form of payment protection insurance and one of a number of types of cover related to protecting the family home and income. This type of cover is also known as mortgage payment protection insurance or mppi.

Mortgage protection life insurance, is what’s known as Term Assurance and is one of the least expensive and simplest types of life cover. The name Term Assurance relates to the fixed period of time over which the cover lasts. In the case of mortgage protection this is for the duration of the mortgage. There are two main categories of term assurance that we will discuss; decreasing term assurance and level term assurance.

As the name suggests, mortgage protection life insurance provides cover for the insured to protect his or her family should death occur during the life of the mortgage. If the insured person dies the intention is that the mppi pays an amount to the beneficiary to pay the outstanding mortgage balance.

Although we all hope that nothing fatal happens as we progress through life and care for our families, sadly this is not always the case and unfortunate incidents can occur. There can be a resistance to taking out payment protection insurance as it does add an extra burden to the family finances that can already be under strain. As none of us can tell what the future holds it is important to think about the consequences of remaining or choosing to be uninsured.

The question that anyone with a mortgage needs to ask is “What would life be like for my family or partner if anything were to happen to me?” First of all if there is any doubt about a partner’s or your family’s ability to cope financially if this happened, then adequate mppi cover is a very wise decision. Life with the loss of a loved one is always going to be extremely difficult to deal with emotionally and adding money problems to this would make such a situation much more of a strain. Even if finances would be adequate in the event of a death it is very wise to balance the usually relatively small cost of the payment protection insurance against the mortgage payments in the event of a loss.

To confuse things a little more, mortgage protection life insurance is also known as decreasing term assurance and differs from level term assurance in that it provides a reducing amount of cover over the term of the policy. The reason the amount decreases is that it is designed to match the outstanding amount of the mortgage. In other words if your mortgage initially starts at say 90% of the value of your property that should be the amount of cover provided at this time, 20 years later when the amount owed is only a small fraction of the original 90% then the cover is reduced to reflect the decreased balance to pay.

One possible advantage of mppi compared to level term assurance is cost. Because the risk to the insurer reduces over time as both the amount of any pay out and inflation eat away at the real value of the cover the premiums may be cheaper. With level term assurance the cover stays the same over time so the risks to the insurer are not only bigger as the insured gets older but the risk in terms of any pay out amount also remains high. The other advantage over level term assurance is that once fixed the premiums cannot rise during the period of cover.

Applying for mppi over the Internet is now a simple process, with some sites offering payment protection insurance form a range of providers rather than a single insurance company. Quotation systems such as the UK Quotefair system on the Personal Touch Financial Services website offer such a panel of providers to give very competitive quotes for all types of property related cover including mortgage protection life insurance or level term assurance.

For further information on anything discussed here please contact us. To obtain an obligation free quote for mppi payment protection insurance please use the quote system below.

Nick Gelsthorpe, Personal Touch Financial, 16th February 2009