Mortgage Payment Protection Insurance
Mortgage Payment Protection Insurance (MPPI) and Accident, Sickness & Unemployment Insurance (ASU):
MPPI is an annually renewable cover that pays a monthly benefit equal to 100-125% of mortgage costs under special circumstances where the borrower is unable to meet the costs.
These insurance policies can pay out for a duration of up to 2 years depending on your provider.
The additional 25% sometimes offered is to cover other additional costs in relation the mortgage such as insurance policies.
Those mortgaging bigger homes should be aware there is a payout threshold as well on all policies (between £1500 - £2500) so if interest rates rise you may need additional financing available somehow.
Joint cover policies insuring two people are also available at a higher premium however the compensation will have to be split at an agreed rate say 60/40 for the lower earner or equally 50/50.
Due to the vast increase in the number of home repossessions in the current recession at the time of writing the government is now considering making this a mandatory mortgage requirement.
What the circumstances the policy will cover for are :
Accident - impairing your ability to make a living through a say disability
Sickness - For example a critical illness which would severely limit your ability to work
Unemployment - Involuntary redundancy or uncontrollable circumstances resulting in a termination of your business or any possibility future self-employment. The terms should always be read carefully in regards to this aspect.
From the list above it is easy to determine that ASU is identical to MPPI but it is designed to replace the majority portion (around 60% at most) of lost income as result and not specifically to cover mortgage payment only.
