Mortgage protection v Income Protection - price differences

Woby_Tide

Apologies for asking something similar to previous questions and also related to ongoing topics re: Assurant price hikes but I just wondered if someone could shed some light on the following.

Having had the hike imposed on me by Assurant I looked at the recommendation of iProtect but was just intrigued why the pricing of the two policies differs by quite a bit depeending on if you choose Income or Mortgage Protection.

Having read the policy docs, the only noticeable difference is that the Mortgage Protection has a couple of clauses detailing the policy ends when you no longer have a mortgage, and the maximum amounts offered differ between the 2 (i.e. Mortgage+25% up to £1650 on MPPI, Income up to £1850 max).

When getting quotes on both policies for the same amount though the Income Policy is about 60% higher. Why would the policy costs differ so much. I know Income Protection could potentially be triggered for longer than MPPI (i.e. after your mortgage is paid off) but the amount that could be paid is only 12 months for each policy? I can't fathom how the pricing would differ so much for what on paper appears to nearly identical policies?

Anyone any idea?

Mortgage Protection Policy Docs

http://www.iprotectinsurance.co.uk/admin/includes/download.php?id=12

Income Protection Policy Docs

http://www.iprotectinsurance.co.uk/admin/includes/download.php?id=6

lisyloo

I'm totally guessing here, but I'm wondering whether there would be the potential to pay out less on the mortgage cover.

For example some people's I/O mortgage costs are now ZERO.

Total guess though.

dunstonh

economies of scale is a possability. They will expect to sell more MPPIs than PPI. So, the level of business is greater and the spread of risk is wider. When people are going for proper income protection they tend to look at PHI before PPI. A common mix is MPPI and PHI together. So, PPI doesnt really get a look in. I know the internet sites call it income protection but its not real income protection. Its a budget plan in comparison to real income protection.

PPI - is payment protection version of income protection (which are you looking at)
PHI - is proper underwritten at point of sale income protection
MPPI - is mortgage payment protection

Woby_Tide

Thanks for the thoughts. I was only really looking at the MPPI as I am covered for PHI via employer but was more intrigued why there was such a sharp difference in something that on paper looked to be the same product. But if they can get punters to pay that, who can blame them

dunstonh

I was only really looking at the MPPI as I am covered for PHI via employer but was more intrigued why there was such a sharp difference in something that on paper looked to be the same product.

If that is the case, then make sure the MPPI provider you choose pays directly to the mortgage. If they dont, then you will find that in the event of a claim they will reduce or refuse to pay out if you PHI is also paying out and you hit the limit. If the PHI is a good one then standalone unemployment cover may be the better option.