Redundancy Protection Insurance reduced payout

Ted_Striker

Hi,

First time poster, long time lurker - please be gentle...

Brief situation, I'm receiving payments under a 'Mortgage plus Household Bills' policy following redundancy but here's the problem - I took out cover for £1500 per month which is well under what I was earning before redundancy and now the insurance company will only pay me just over £1100 per month as they will only consider my mortgage amount, gas, electric, water, TV licence and council tax as 'household bills'. The policy document has two pages of definitions at the start none of which define 'household bills' and there is no reference to 'household bills' in the rest of the policy.

Obviously I'd like to be able to claim the full amount for which they have been collecting monthly premiums from me for some time and I'd say 'household bills' could reasonably include such things as food, car insurance/tax/repairs/fuel plus all sorts of other monthly outgoings which would easily take the monthly amount to £1500. It does appear odd to me that they go to great lengths to define such terms as 'you', 'us', 'we' etc, but fail to define 'household bills' when it is critical to the amount payable and is also a vague term.

Any ideas what to do? Does it seem reasonable that they can take this premium then just decide to pay less as my outgoings do not tally with their private definition of household bills? Everyone I've spoken to would at least include such things as food and car expenses as household bills - what do you think :question:

Thanks for any suggestions...

Graham

dunstonh

Does it seem reasonable that they can take this premium then just decide to pay less as my outgoings do not tally with their private definition of household bills? Everyone I've spoken to would at least include such things as food and car expenses as household bills - what do you think :question:

Yes it is reasonable as that is how MPPI works. If you wanted further income protection ou should have have a PHI policy or a PPI.

Typically, the policy documents do state the maximum they will pay and you should periodically update your MPPI to reflect your mortgage payments. Many do not. However, you usually find that in the event of a successful claim, the provider will realise you are over insured and will refund the overpaid premium. If they dont automatically, then you should ask them to do this.

Ted_Striker

Hi,

Thanks for the reply - the policy I took out is for 'Mortgage plus Household Bills' not just Mortgage payments. The question I was asking was about their very specific and 'undisclosed-until-claim-time' definition of household bills.

I agree that had I just taken MPPI then I would be overinsured as my mortgage payments are £880, but the rest was a reasonable estimate of my household bills. Had they made it clear that they would only cover the bills they later specify I would have added them up and taken cover to that amount.

Taken from the small print...

*******************

Monthly Benefit means the amount of cover You have selected in order to cover your mortgage repayments and your household bills, as shown on Your Schedule. This amount will not be less than £100 or more than £2,000 and must not exceed 50% of Your gross monthly salary during the Period of Cover

*******************

No mention from them of any refund/lowering of ongoing premiums either.

Graham

dunstonh

the policy I took out is for 'Mortgage plus Household Bills' not just Mortgage payments.

Yes. most MPPI plans have an allowance to include household bills or a cap on 125% of the mortgage or something similar.

No mention from them of any refund/lowering of ongoing premiums either.

have you asked them?

Ted_Striker

I see what you're saying and I agree that it's for mortgage plus bills - my problem with them is that they don't define which bills are allowed to be included in the household bills until you try to make a claim. If they are going to restrict the payout based on their definition of household bills surely they should specify exactly what bills are allowed in the policy documents so you can check that the cover is suitable and set the cover level at an appropriate point?

I'm no expert and shouldn't have to be as they are selling direct to consumers. I took the policy out in good faith and set the cover at a level that covered what I regarded as 'mortgage plus household bills'. When I got the policy I read it cover to cover and was happy that it provided the level of cover I required.

It would not have been difficult for them to have provided in the policy document a list of exactly what bills are allowed and I believe by not doing so they have mislead me about the value of the cover, whether intentionally or otherwise.

Maybe I'm wasting my time pursuing this but at a £336 defecit per month it's not an amount I can just ignore! Thanks for your continued advice, it's great to hear an independent opinion on the situation but I still feel I'm in the right here....

I haven't asked them about a refund of premium yet as I intend to get the full cover that I have been paying for - if that eventually fails I will ask for a refund of course!

Cheers,
Graham

ACG

Whether its right or wrong or not im not here to argue but most MPPI policies will only cover mortgage, building and home insurance. I didnt realise thy also covered gas and electric. but they definately dont cover food etc as you could quite easily inflate that.

They want to ensure you have a reason to go back to work so will not cover everything you ever spend even if you are over insured.

dunstonh

You tend to find the older insurers do specify such things. However, in the last few years a number of internet providers set up and their documentation was dire. It got so bad that the FSA stepped in.

Is yours one of the old "traditional" providers or is it one of the internet providers?

Ted_Striker

My provider is Columbus Direct, administered by MMS (Marketing and Management Services Ltd) - I assume this isn't one of the traditional ones? It does however specify 'Underwritten by Certain Underwriters at Lloyd’s' - this must be a good thing?

Interesting that the FSA has stepped in - this is exactly the sort of information that will be really useful at the first stage of my complaint. In these days of excessive litigation, I find it difficult to believe that they could legally restrict the payments based on a non declared definiton of a critical element of the cover.

I'll fire off my first letter today and see where it gets me - luckily I have time on my side having not found a job yet so nothing to lose by pursuing it!

Graham