Mortgage Protection: Don't Get Fleeced!

Mortgages and Home

21 February 2006 | 0 Comments

If you want insurance to protect your mortgage payments if you fall ill or lose your job, don't buy it from your lender.

When you took out a mortgage, did your lender try and persuade you to take out Mortgage Payment Protection Insurance (MPPI)? And did you fall for it?If so you're very likely paying over the odds. MPPI is simply accident, sickness and unemployment insurance which is specifically designed to meet the mortgage payments. It's similar to the payment protection insurance you might take out to cover loans or credit cards.According to British Insurance, buying MPPI through your mortgage lender can cost as much as a third more than buying direct from a specialist insurance broker. And you can't be specific about the sort of cover you get.For example, the specialist lender usually offers cover from day one of your illness or unemployment whereas your mortgage lender's MPPI often doesn't pay out until two months later. And your lender's policy will typically pay out for up to a year whereas you may want cover for longer.Mortgage lenders also bundle the unemployment and health components together whereas specialist brokers usually let you take either out in isolation -- for example, where you already have health insurance via your employer and you simply want unemployment cover.As with any type of insurance, shopping around can save you money -- usually thousands of pounds over the lifetime of a mortgage. For example, British Insurance would charge around £23 a month to cover the payments for a £100,000 mortgage while Cheltenham & Gloucester would charge £50 a month -- a difference of more than £8,000 over a 25-year term!So, if you're looking for MPPI don't buy it from your mortgage lender and if you've already been duped, switch to a cheaper insurer.> Check out the deals in our Mortgage and Insurance centres.

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