In the event of involuntary redundancy, illness, or accident, leading to a loss of income, Brits can rely on savings, the State, or low cost mortgage payment insurance from a broker or insurance specialist. For those that do not have savings to cover monthly mortgage payments, and understand relying on the State might be a lost cause, mortgage payment coverage is a practical option. The problem is that most consumers either are unaware of the benefit of buying the insurance from a specialist, or already do buy the insurance, at high premiums, without even realizing it.



Mortgage payment insurance is one of three basic types of payment protection insurance (PPI), the others being loan and salary protection covers. There are some slight differences in benefits and terms from one provider and one product to the next, but the general concept of the product is universally the same. The insurance provides monthly income payments to the insured, which begin from 30 to 90 days following a covered event. Some covers are backdated to the first day of protection.

This short-term insurance protection is sometime confused with longer-term income protection, as they are often known by similar names. The difference is that mortgage payment insurance payouts are intended to provide a short term payment period, typically 12 to 24 months, to help the insured get through a short stint of unemployment caused by one of the covered events. Income protection is more of a long-term payment plan.

The difference between the three coverage types, mortgage, loan and salary, is that mortgage usually has a higher allowable payout percentage, at a higher premium, of course. Payout for mortgage coverage is often up to 65 to 70 per cent of normal monthly income, while salary protection is more like 50 per cent.

Unfortunately, many Brits are so unfamiliar with the insurance that some have the protection but do not know it. Some know they have it, but do not realize its benefits or that there may be more affordable premium options and better service available. The Competition Commission is currently in the midst of a major investigation with results set to be announced in February 2009. Their research could lead to stronger regulations for providers and better consumer protection.

Many banks and large lenders package the insurance with other products in a manner that is deceptive or pushy for the consumer. Consumers need to know that there are stand alone brokers who specialize in insurance and are more knowledgeable about plans that are right for particular consumers. They also have options that are commonly 40 to 80 per cent lower than what institutions offer.

It is important that consumers go into any loan or finance purchase with their eyes open. Brits should always read the fine print to be sure products and insurance products are not thrown into their loans. Mortgage payment insurance is great when it is purchased at low cost from a reputable provider. It can be a rip-off when purchased from a less reputable provider not out for the interests of the customer.