Mortgage Payment Protection Insurance

Ringo981

Hi All

when renewing my mortgage I was asked if I wanted to take out a mortgage payment protection policy,
I have taken out a five year fixed with repayments of 321 a month
I have critical illness cover

And if I want protection its an extra £27 a month.

What I need to know is would I be better putting the extra £27 towards paying off the mortgage a month or take out the policy.

What made me ask this that people have said that the insurance companies will do there best not to pay anyway and try and get somebody else to pay up if I got injured at work or in a vehicle.


Thanks

Ringo

dunstonh

What I need to know is would I be better putting the extra £27 towards paying off the mortgage a month or take out the policy.

If you dont have a claimable event then you are better paying the extra onto the mortgage. If you do have a claimable event you are better with the insurance.

Are you going to have a claimable event?

What made me ask this that people have said that the insurance companies will do there best not to pay anyway and try and get somebody else to pay up if I got injured at work or in a vehicle.

Its why I prefer the PHI version of income protection rather than the PPI version.

WombleSW20_2

Ringo - the £27 premium you have been offered is expensive - there are cheaper and probably better policies in the market that will cover you (you should pay around £18 a month for a top notch policy covering your mortgage payment). Ignore DunstonH - he is obsessed with PHI. PHI is expensive and only covers accident and health and most people want the unemployment which it doesn't offer. And before DunstonH pops in with his recommendation that you should get a PHI policy and take out unemplyment only cover , a) there are few reputable insurers still offering this unemplyment only cover, and b) the combined cost of this with PHI would be extortionate.

I suggest you try and find a reputable IFA (word of mouth is best) and ask him to source an MPPI product. He can then take you through the options as well as whether a PHI is suitable for your needs and your budget.

Of course there are certain companies out there that will try to wriggle out of paying but you get rotten apples like this across the entire insurance industry. Ask your IFA if he can recommend one with the best pay out record. There is nothing wrong with MPPI and DunstonH knows this (although it does pay IFA's a lower commission :])

OshayAway

WombleSW20 wrote: »

Ringo - the £27 premium you have been offered is expensive - there are cheaper and probably better policies in the market that will cover you (you should pay around £18 a month for a top notch policy covering your mortgage payment). Ignore DunstonH - he is obsessed with PHI. PHI is expensive and only covers accident and health and most people want the unemployment which it doesn't offer. And before DunstonH pops in with his recommendation that you should get a PHI policy and take out unemplyment only cover , a) there are few reputable insurers still offering this unemplyment only cover, and b) the combined cost of this with PHI would be extortionate.

In DunstonH's defence, he is correct. PHI trumps PPI in every way although doesn't include unemployment cover as you say.

There are quite a few providers that do offer unemployment only cover and many that removed this option are now offering it again.

Will PHI cost more? possibly, depending on many factors but it is far more likely to payout than PPI / MPPI which typically exclude the two most common reasons for individuals being signed off work.

All options should be carefully considered and value factored in, not just cost. If a policy cost 30% less but is half as likely to payout, is that a good deal or a false economy?

dunstonh

Ignore DunstonH - he is obsessed with PHI.

I take that as a compliment. All the best advisers would pick PHI over PPI.

There is nothing wrong with MPPI and DunstonH knows this (although it does pay IFA's a lower commission :])

As a fee based IFA it doesnt bother my in the slightest which pays the most. However, i disagree with you. MPPI tends to pay commission monthly whereas PHI is up front or on a limited period of drip. If you do a PHI policy on level basis like an MPPI then the levels are similar or even less on a PHI policy. If you took it up front then within a few years the MPPI would be paying more.


The OP stated "people have said that the insurance companies will do there best not to pay". That is true with PPI. It has some of the worst claims stats going. With PHI being underwritten at point of sale rather than point of claim like a PPI, the insurance companies have far less room to wriggle out of a claim.

kingstreet

Ringo981 wrote: »

Hi All

when renewing my mortgage I was asked if I wanted to take out a mortgage payment protection policy,
I have taken out a five year fixed with repayments of 321 a month
I have critical illness cover

And if I want protection its an extra £27 a month.

What I need to know is would I be better putting the extra £27 towards paying off the mortgage a month or take out the policy.

What made me ask this that people have said that the insurance companies will do there best not to pay anyway and try and get somebody else to pay up if I got injured at work or in a vehicle.


Thanks

Ringo

A couple of things you need to consider. If your employer will continue to pay some element of your income for the first few months of an illness or disability, it's worth tying this "waiting period" in to make your cover cheaper.

For example, if your employer will pay you full pay for six months, it may be worth thinking about permanent health insurance with a six month waiting period. This will pay you a monthly benefit for a longer period than MPPI, should you get a condition which keeps you off work for two years or longer.

The longer the waiting period, the lower the premium.

This could be accompanied by unemployment cover which will pay the benefit after just 30 days of involuntary unemployment, with payments backdated to day one and payable for upto two years.

Most Mortgage Payment Protection providers will only cover you immediately if you are transferring cover from another provider, or if you have only just taken out a new mortgage. Don't leave it a few months, or you might find you can't claim until 120 days has passed.

MPPI will probably suit you better if you're in an occupation which would be considered to be a higher risk, or with a higher degree of manual labour involved and for those needing shorter waiting periods where their employers offer little or no extended sickness benefits.

MPPI can give you a waiting period of only 30 days for both accident, illness and unemployment claims, with benefit backdated to day one. Benefits can be paid for twelve months, sometimes two years, depending on what you choose at the outset.

It's worth sitting down with a good independent advisor who'll be able to establish how your circumstances can best be served by the options that are available to you and who will then be able to get the best cover for you at the best price.

OshayAway

It's also worth noting that many PHI providers allow you to limit the payout period to 2, 3 or 5 years etc, which also has the effect of bringing the premium down.

This is obviously a compromise as one of the main benefits of PHI over PPI/MPPI is the ability to claim long-term but this doesn't effect the other major plus points like fully medical underwriting at application, few if any exclusions and the fact premiums can be guaranteed so the insurer can't just double, treble, quadruple or cancel your cover as they can with PPI/MPPI... to name just a few.

FinAdv

Hi Everyone,

Very interesting discussion. How about a product that covers you for ASU that would pay you 12 months benefits in case of redundancy and PHI in case of sickness or accident? It combines both the benefits!!!

WombleSW20_2

DunstonH quote: 'I take that as a compliment. All the best advisers would pick PHI over PPI'

My point here is that you're not objective. A simple view such as picking PHI over PPI is only true if a) the OP wishes AS and not IU cover and b) has the budget to pay for this.

Comments like this don't do you justice as an IFA. And the decent providers of IU only cover are few and far between nowadays. Most of them carry profession or industry excusions or are available only to new mortgage holders only.


On commission, PHI retention is longer as policyholders don't shop around as much when they do have one, therefore it does pay a higher commisison than MPPI.

DunstonH quote "It has some of the worst claims stats going". Admittedly single premium PPI did have poor claims history, but as DuntonH well knows, this is no longer sold. An MPPI policy sold through a decent IFA will have slightly lower claims acceptance rates than PHI (in my experience, for a regular premium product this is 85% vs. circa 90% for PHI).

WombleSW20_2

Kingstreet - just read your response - good, objective advice.

kingstreet

FinAdv wrote: »

Hi Everyone,

Very interesting discussion. How about a product that covers you for ASU that would pay you 12 months benefits in case of redundancy and PHI in case of sickness or accident? It combines both the benefits!!!

I regularly write ASU with PHI with a 52 week deferred period for those with little or no sickness benefits.

Public sector workers who get six months full, followed by six months half, it's unemployment cover only with PHI with 52 week deferred period.