Top tips for buying MPPI

10 February 2011

Top tips for buying MPPI

Published: The Financial Times Limited 2011, February 9 2011 15:25

By Lucy Warwick-Ching

MPPI covers monthly mortgage payments for a set period if the borrower becomes unemployed or prevented from working because of sickness or disability. However, MPPI can be very expensive and it can also be quite limited in what it pays out on. CUNA Mutual, which provides financial services to mutuals, tells Money Matters five tips to help consumers choose well and avoid inappropriate MPPI selling.

Paul Walsh, chief executive at Cuna Mutual, said: “It is imperative that MPPI products are kept simple and the FSA regulations are followed - re-rating products annually and smoke screen offers will not work. We need to restore confidence or the industry will suffer.
“The abolition of the FSA could put the industry at tipping point. The industry and our regulatory environment need a sense of balance - one that protects both consumers and also allows lenders to ensure appropriate protection on loans.”

Here, he gives some pointers on what to look out for:

1. One size fits all cover should be approached with caution. You will undoubtedly be paying to cover the costs of a headline grabbing policy and the campaign behind it.

- Ensure when you buy, the sales process asks and answers questions relevant to your situation.

2. Beware upfront lump sum payments for policies – your needs may change and these policies leave you exposed as you have paid upfront.

- Instead choose a monthly, flexible, portable product that allows you to change mortgage provider without a period of re-qualifying for cover. Within this make sure your policy offers an appropriate and affordable excess.

3. Investigate any long exclusion periods for existing medical conditions

- The industry standard time limit before you can claim is 12 months before and 12 after registering the condition, any more exclusion and you risk being penalised unnecessarily, better products exist!

4. Avoid requests for unreasonable evidence of medical status or exceptions for cover for back conditions and mental illness. These are classic ways to confuse people to overstate their health status on forms. Minor and irrelevant afflictions are sometimes used to invalidate claims.

- To avoid this, pick a policy where insurer’s rights to change rates, terminate cover or amend terms and conditions are clearly stated and upfront.

5. Long re-qualification periods are crucial to avoid. Why should you not be able to claim on insurance, because you have claimed on it once already?

- You pay a premium to be covered in all eventualities, not just a one off mishap, so ensure you are covered at all times.

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