I'm so confused... Should I get MPPI?

jowie

Hi there,

I'm sorting out a mortgage for the first time and so I went to see my IFA yesterday. She gave me lots of information about different life policies and mortgage protection schemes. At the time, I decided that what was right for me was a Life Policy (lump sum pays off mortgage in event of death) and an Income Protection policy (pays out my living expenses inc. mortgage if I am ill or have an accident, after 13 weeks). The Life Policy portion costs about £35, the MPPI portion costs about £75.

Now I've come home and had a discussion with my partner, I am worried that she is selling me something that is too expensive. I must admit I wasn't expecting to have to pay £110 over the cost of my mortgage each month, but I will be fine with doing so if it is necessary. I haven't yet received any terms and conditions of these policies so I can't read the small print.

I am slightly worried that my IFA is trying to sell me stuff that makes her commission, but Martin's article on here says the best advice should come from an IFA rather than through the banks. I've already discovered that I can get better and cheaper buildings and contents insurance from Lloyds TSB than from the company she deals with, Axa. Should I trust her with the insurance policy?

I'm a first time buyer and am finding this whole process really confusing! :mad: I'd appreciate ANY help you can give me!

Thanks :beer:

R_P_W

Life policy seems a little high. How much is the mortgage?

Can't comment on the other part....it depends on your circumstances. What would you do if you could not work due to illness? Could your partner pay the bills alone? D you have savings to fall back on?

dunstonh

I am slightly worried that my IFA is trying to sell me stuff that makes her commission

An IFA is required to recommend to meet your needs. If you feel you dont want to cover all your needs then tell your IFA and he/she will adjust to your budget and note the restrictions.

but Martin's article on here says the best advice should come from an IFA rather than through the banks.

That is correct. However, in reality, most people dont cover their full needs. They accept some risk but prioritise areas they feel are more important. The IFA has to start from maximum cover though as at the end of the day, if you lose your house because you are not insured, you would complain about that IFA. Once that position is known, adjusting to budget is the next step.

I've already discovered that I can get better and cheaper buildings and contents insurance from Lloyds TSB than from the company she deals with, Axa. Should I trust her with the insurance policy?

With insurance, you will find cheaper. A lot of the companies that supply IFAs are better quality. Some will also appear on comparison sites but house insurance is not really something that most IFAs get involved in. Its a service they provide but the focus tends to be quality rather than price.

Dont mistake price with trust.

jowie

R_P_W wrote: »

Life policy seems a little high. How much is the mortgage?

£214k.

Can't comment on the other part....it depends on your circumstances. What would you do if you could not work due to illness? Could your partner pay the bills alone? D you have savings to fall back on?

If I could not work due to illness, I would be screwed unless I had a policy. My work would possibly carry on paying me, but it is not policy and discretionary only. My partner could not pay the bills alone. I have no savings to fall back on. My only fallback is my mum and dad, who could possibly help me out for a short period of time.

jowie

dunstonh wrote: »

An IFA is required to recommend to meet your needs. If you feel you dont want to cover all your needs then tell your IFA and he/she will adjust to your budget and note the restrictions.

That's cool. I could see she was doing that yesterday, going into the system and removing stuff but she had to give a reason for everything that I didn't want. ("My client feels that he does not need"... etc to cover herself I guess).

That is correct. However, in reality, most people dont cover their full needs. They accept some risk but prioritise areas they feel are more important.

I am not worried so much about redundancy, because I would go out and find something, even freelance. But I do feel that I need cover in case god forbid I had a serious illness and was off work for an operation or similar. I am worried that most of these policies only cover for 12 months (I don't know about this particular policy). What are you supposed to do after that??

Dont mistake price with trust.

So you mean sometimes the cheaper ones are better? Should I shop around for MPPI?

ACG

Why are they suggesting MPPI and not full on income protection? There isnt a massive difference in cost in the main unless you have a risky job.

If you would be screwed if you couldnt work, then it seems very stupid to not insure that income. If cost is an issue, delay the deferred period for a bit longer? reduce the cover down by say 10% - but enough to cover your costs.

These are things your broker should be discussing with you. Its not a case of that is it - take it or leave it.

kingstreet

Income Protection (PHI) can pay out until you retire, if you opt for that length of cover and have a disability which last that long.

Short-term cover is not adequate, in my opinion.

getmore4less

MAke sure you are clear what cover you are getting and what the alternatives are.

Life cover , why do you need that do you have dependants?

if you partner wants the house paid off if you die they need the cover on you not you.

Would they stay there anyway if you died.

Income protection, how long does it pay out, how long to save enough to cover that.

What other alternatives are there,

We decided that the life cover/permanent heath with our jobs was enough to see us through(happy to take the risk of jobs going) and there was always the option to sell up and downsize/relocate somewhere cheaper.

jowie

ACG wrote: »

Why are they suggesting MPPI and not full on income protection? There isnt a massive difference in cost in the main unless you have a risky job.

Sorry, it's me getting confused. I thought they were the same thing. The Income Protection she suggested to me should cover me to the level I would need in order to "survive" (i.e. mortgage payments, utility bills, food etc). She didn't say anything about how long it would pay out for, I just assumed it would be indefinite until I looked at Martin's PPI article which said 12 months, which got me worried.

If you would be screwed if you couldnt work, then it seems very stupid to not insure that income. If cost is an issue, delay the deferred period for a bit longer? reduce the cover down by say 10% - but enough to cover your costs.

I've already deferred the period for 13 weeks... I don't think I could ask my parents to help me out for longer, or there would be no point. I currently have no savings, it's all gone on buying a house!

These are things your broker should be discussing with you. Its not a case of that is it - take it or leave it.

I appreciate that, and I will take all of this to her and discuss it further. I just worried that she might be selling me policies that are tied in with her company (I don't believe anyone is truly "independent"!).

jowie

kingstreet wrote: »

Income Protection (PHI) can pay out until you retire, if you opt for that length of cover and have a disability which last that long.

That must be what her notes meant - she wrote "retire" which now makes sense. What does PHI stand for?

jowie

getmore4less wrote: »

Life cover , why do you need that do you have dependants?

No, but I have a partner with children, plus parents who are helping me out with all of this. I want to make sure they are covered if I die.

if you partner wants the house paid off if you die they need the cover on you not you.

The Life insurance would pay off the house if I die. That's what she said... Lump sum, tax free.

Would they stay there anyway if you died.

Maybe, but even if not, where would they go? I am the bread winner.

We decided that the life cover/permanent heath with our jobs was enough to see us through(happy to take the risk of jobs going) and there was always the option to sell up and downsize/relocate somewhere cheaper.

Sounds like the same as I've been advised... Life and Income yes? In which case, would you say £110 a month was okay or too expensive?