Mortgage Income Protection

Mortgage income protection plan is a monthly benefit which is given in case you are not alble to work due to illness or injury. Mortgage protection is a short term payment plans which covers for the income loss in case you are not able to go for work due to some illness, injury or accident, but the cover is only for 12 months. These plans are designed specifically to cover for the repayments of mortgage and the maximum amount that you are eligible is mostly 125% of the total monthly repayments. These policies are mostly termed as Mortgage Payment Protection or MPP.

The main question that lingers our mind when we think of taking a MPPI plans are:

  • When will it start paying?
    The policies mostly start paying out after 30 to 60 days once the issue has started. The payment is mostly made only for 12 months period. Some of the companies provide “back to day one” facility in which they backdate the benefits so that you get the cover for previous periods also. This is of great help as you will not require a cover in case you lose the work only for a few weeks.
  • Are the policy periods limited?
    Yes! Most of the policies pay out for 12 months. However, there are some companies which are cheaper and provide cover only for 3 months and for most people this is beneficial as after that the state benefit will kick in.
  • Is there a maximum payout limit?
    Most of the policies limit the monthly payout from $1500 to $2000 and hence can be an issue for those who have bigger mortgages, especially if the rate of interest rises.
  • Switching from one policy to another cheaper one can save you a fortune but it is not always safe to do so. This is because most of the companies prevent you from making a claim in the first 3 to 6 months of taking up the policy. Some of the companies do not cover if there is pre-existing disease or when there is foreseeability of redundancy. This can be a trouble if you have switched to new policy and are on the verge of losing your job.

Mortgage protection plans are not simple policy and it is advised that one should get advice from a private consultant who will give you unbiased advice.