Mortgage Protection: Is Your Cover Adequate?

If you are looking at mortgage protection insurance or MPPI from your mortgage lender, you may find that they only quote you for the cost of covering your mortgage payments.

However, if you lose your income for any reason, your mortgage repayments are not the only outgoings that will suffer. When you are looking at taking out cover, it’s a good idea to find out the cost of covering other payments. Then look for a policy, either from your lender or from elsewhere, that will cover these other payments as well.

There are some other regular outgoings that would have quite a serious effect if they could not be maintained.

• Home and contents insurance. The “buildings” part of home insurance is usually a requirement of your mortgage and it could be very serious if you were unable to keep up these payments. The lender should agree to cover these payments – if the home was lost in the event of fire or flood, they would lose their security. The “contents” part is not a requirement, but losing your belongings through fire, flood or burglary would be very serious if you had no income at the time.

• Mortgage life insurance. If you have a repayment mortgage, you would have this policy to ensure that your family or dependants would not be left homeless, or have the problem of paying off your mortgage, in the event of your death. It would be important to include this in your mortgage protection insurance. If it was allowed to lapse, it would have been a waste of money paying for it in the first place.

• Endowment policies. If you have an endowment policy, or other investment plan to pay off your mortgage capital, it is important to include this in your mortgage protection insurance. If you don’t, the policy would only cover your interest payments. If the payments to your investment plan lapsed, you would not own your home at the end of the mortgage and this would have serious consequences.

Don’t let yourself be fobbed off with an inadequate mortgage protection insurance policy. Even if the premiums are higher, it is worth making sure all your payments are covered. Otherwise you could cover your mortgage payments, but still risk losing your home.

Sean Horton is a Director of Enhanced Wealth Limited who offer a specialist mortgage payment protection insurance policy