It has been a roller coaster last 24 months in the mortgage payment protection insurance (MPPI) market. Not only has unemployment skyrocketed leading to a large number of claims being made but an unattractive proportion of those claims have been declined as a result of policies being sold which should never have left the self.
The main issues with this type of cover in the past usually related to banks selling mortgage payment protection on home loans without checking that the policy eligibility criteria has been met. In other words, right from the very start these plans had no chance of ever paying-out.
Classic examples include sales to contact workers, part-time workers and newly employed workers, not to mention cases where the policyholder's employer had announced redundancies prior to the plan being taken out, which often excludes eligibility on the grounds of ‘reasonable knowledge' of possible future unemployment.
When setup correctly MPPI is a solid form of mortgage protection against the risk of short-term accident, sickness and unemployment. Combining MPPI with mortgage life insurance and critical illness cover does provide a robust means of protection against some of the most significant risk factors out there. For plans setup correctly the payout rates should be over 90 per cent.
It is encouraging that the Competition Commission has placed significant restrictions on the ability of banks to sell mortgage protection insurance to customers who have just taken out a new loan. This action allows time for customers to review the market to get the best deal and to take advice from a specialist in the area, which is a massive step in the right direction.
Tom Conner
Drewberry Insurance
www.drewberrymortgageinsurance.co.uk
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