Mortgage Protection is a life insurance policy that pays off your mortgage, if you die while the mortgage is in force. If there is more than one borrower, the policy will pay off the loan on the first death of the joint borrowers.
The policy will have a term identical to your mortgage. The benefits reduce as the balance of your mortgage decreases. The premium is fixed for the duration of the policy and is calculated based on your age and medical history; the mortgage amount and term.
You will have to complete a proposal form and answer medical questions to get a Mortgage Protection policy.
A mortgage protection policy is a condition of a mortgage loan and is compulsory where the borrower is under age 50 and the mortgage is secured on their main residence. Lenders may still require that such a policy is taken out before they will approve any loan application.
On death, the Insurer will pay out the full proceeds of the policy to the Lender.
Serious illness cover is available as an option with most mortgage protection policies.
Payment Protection Insurance [PPI] is a policy designed to cover the repayment of loans, mortgages, or credit card payments if you suffer a loss of earnings, due to being made redundant or if you are absent from work due to an accident or sickness. Where these policies are sold to self-employed persons, it is usual that the redundancy cover is replaced by bankruptcy cover.
The policy normally pays a monthly benefit equivalent to the repayment amount on the mortgage for as long as the condition lasts or for a maximum period of twelve months and after a waiting period of one month.
Many people may not realise they have a PPI agreement as part of their loan or credit card agreements and PPI is NOT a compulsory insurance cover which consumers have to take out when securing credit.
Under the terms of the Consumer Protection Code this policy should only be sold to consumers who request it and who will benefit from it.