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Mortgage Payment Protection Insurance
by: Sahil | last updated: November 27, 2009
Category: Homeowners Insurance | Tags: Mortgage payment protection, mortgage insurance, mortgage
Category: Homeowners Insurance | Tags: Mortgage payment protection, mortgage insurance, mortgage
A mortgage payment protection is a part of mortgage insurance and covers the applicant in case of disability, involuntary unemployment, or death. These policies can be expensive compared to normal mortgage policies however the risk associated with such policies is very low and can come in handy during disasters or unforeseen events.
Mortgage payment protection insurance (MPPI) is also called ASU or Accident, Sickness, or Unemployment. The most common form of Mortgage Payment Protection Insurance is the disability coverage. In this type of coverage the borrower pays the premium for the insurance along with the mortgage payments. In case of the person’s disability, the insurance cover protects the mortgage payments by paying them off on behalf of the borrower for a certain period of time.
The life protection covers the complete amount of mortgage payment in case of the death of that person. The borrower needs to assign a beneficiary in order to make a claim in case of the borrowers death. These are usually the cheapest form of ‘Life Insurance’ available in the market. However the prices and policies may differ from company to company.
MPPI also protects the payments towards the mortgage if the person meets with an accident and dismemberment. However the terms and conditions may be very complicated in such cases and it is a better idea to seek advice from a professional third party before signing up for the same.
Any type of payment protection insurance is basically similar and protects the borrower from default in payments due to sickness, unemployment, or death. However it is important to keep in mind that these services are add on services offered by the lender or the issuer. They are not compulsory and need not be bought if you think that your future finances are secure enough. Moreover in the US this type of insurance may not cover you in case of unemployment whereas in the United Kingdom MPPI does protect the applicant in case of unemployment.
Some of the advantages of purchasing such a policy are apparent; however there are certain disadvantages to such policies. Some may be more costly than necessary; some may have stringent terms and conditions on basis of which the insurance can be denied. Furthermore since these are for-profit programs, their goal is profit maximization and the more policies they do not approve the more they earn.
It is advisable to very careful when buying such a product since the company will pounce on a single mistake or technicality in order to deny you the benefits of Mortgage Payment Protection Insurance. Reading the terms and conditions carefully, contacting the company directly over the phone to clarify doubts, calculating the feasibility of the amount covered, and checking the wait period are some of the points to be seriously considered before buying any type of payment protection insurance.
Many lenders sell their own MPPI and some do so inconspicuously so that the customer keeps making these payments without noticing them. Some offer it as an automatic add on service so that the consumer is kept in the dark about this hidden cost. Therefore when getting a mortgage, it is important to note if it has any add on services that can be acquired elsewhere at a cheaper rate.
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