Mortgage Payment Protection Insurance (MPPI) also known as Accident Sickness &/or Unemployment (ASU), is a short-term general insurance policy for income replacement. With MPPI you protect against lose of your monthly income – usually up to £3, 000 – in case you lose your job through redundancy or can’t work due accident or sickness. The maximum benefit is usually half to two thirds of income and benefits are not taxable. It is possible to have Unemployment Cover as a standalone policy, and one can also have Accident & Sickness (Disability) Cover as a standalone policy.
In the event of a claim, the insurer pays out a monthly benefit to allow the insured to meet their monthly mortgage payment and other related costs. The maximum payout period in the UK is up to two years or until you return to work, whichever happens first. The premiums are usually monthly. However, if it’s a single premium policy, it also usually pays a cash lump sum if you die or become disabled during the policy.
Eligibility – anyone can apply for an accident sickness & unemployment policy so long as you are aged between 18 and 65 and you normally reside in the UK, Channel Islands or the Isle of Man. You must also be in employment or self-employment for at least 16 hours per week and have been so for the last 6 months.
MPPI/ASU Advantages & Disadvantages
- MPPI is for you if – you took out your mortgage or re-mortgage after October 1995, as you are unlikely to get any help from the state with your mortgage payments if you get into trouble.
- MPPI is for you if – you think making your mortgage payments would be difficult if you were made redundant or too ill to work and you don’t have any other protection to cover household bills.
- MPPI is for you if – you don’t have a job which has sick pay or you’re self-employed. Even if the job offers sick pay, it normally for a maximum of three months.
- MPPI covers only a specific debt – your mortgage, so you won’t have extra money to provide for other things like food, clothing etc. Some providers allow additional cover of up to 25%,
- MPPI pays out for a limited time period, typically 1 to 2 years or until you return to work whichever happens first.
MPPI Compared To Income Protection Insurance (IPI)
- MPPI is a short-term insurance and the maximum benefit payout period is 24 months,
- MPPI potential benefit payout is lower,
- MPPI has less rigorous medical underwriting, and
- MPPI includes redundancy or unemployment cover.
It is important to read the provider’s Key Facts before committing to the product