Is Mortgage Payment Protection a Waste of Money

Mortgage payment protection insurance doesn’t always get the best press. The principle of using a policy to help meet mortgage commitments in the event of redundancy, illness, or accident may be sound but these policies may not work for every individual.

Those considering this as an option may want to consider three important factors to see if this coverage is necessary.

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Do They Have Other Ways of Paying Their Mortgage or do They Need Mortgage Payment Protection

It may be worth looking at the overall financial situation here before coming to a decision. Many consumers take an MPPI policy out of sheer panic. They worry that they may not be able to pay their mortgage if they lose their job or are unable to work. But, some actually have other options that could make a policy unnecessary, such as:

  • A working spouse/partner.
  • Other forms of insurance (i.e. income protection or critical illness).
  • Work-related benefits.

So, it may be worth first assessing whether the cash paid from this policy will actually be needed or not.

What Kind of Mortgage Need to be Covered

Some mortgages will allow a homeowner some flexibility of repayment. This may be worth investigating as it could offer an alternative to mortgage payment protection insurance, at least in the short term. This may be applicable with a deal that allows:

  • Payment holidays.
  • Flexible repayments.

Although any deferred payment arrangements made will need to be repaid later, this may work out to be a more cost-effective solution for some.

Do They Qualify for Mortgage Payment Protection in the First Place

MPPI policies probably have more exclusions and get-out clauses than any other kind of consumer insurance. A homeowner takes this kind of policy out at their own risk. There is no onus on the insurance company to make them read the terms.

It is their own responsibility to see if they will technically ever qualify if they need to claim. Some won’t cover the self-employed or contractors, for example. Others say that they do but add on extra clauses and conditions that need to be met before a claim will be approved. It may be worth checking on whether a mortgage payment protection policy will give coverage in the first place as well as assessing whether it is needed and considering other repayment options.

After considering these three factors (and taking some time to look at how MPPI works generally) the consumer may be better placed to make the right decision. Bear in mind that shopping around for the lowest cost policy may also be worth doing.

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