In the latest piece of research by Drewberry it was found that only 48 percent of those looking to take out mortgage payment protection insurance (MPPI) seek additional cover for other monthly costs.
Specific MPPI plans allow for policyholders to cover up to 125 percent of their monthly loan repayments. This means that an extra 25 percent can be insured to cover other monthly expenses and financial commitments.
Of all the MPPI enquiries made on this very website over the previous six months, 52 percent decided only to cover their total monthly loan repayments, therefore leaving no additional cover for other costs, such as utility bills, other insurances and grocery bills.
In terms of age groups, younger borrowers appeared to be more protection minded, with 57 percent of those aged under-35 taking out extra cover compared to only 41 percent of those aged 35 or older.
It is possible that younger generations are more protection minded due to those in this age group often starting families or buying their first home, with understandable caution.
Lacking needed protection
This new research suggests that only 48 percent of borrowers actually look to cover any additional amount on top of their repayments. Although MPPI is a commonly used form of mortgage protection it is surprising that many more people do not use the product to its full effect by covering other monthly cost in addition.
When someone looses their job through accident, sickness or redundancy MPPI is a solid safety net for their loan repayments. However, other monthly costs also need to be paid and serious questions need to be asked as to where the funds will come from to pay for these costs.
Without significant savings to fall back on individuals are likely to have to borrow money from their friends and family, who may not always be in a position to support them.
When looking to take out MPPI it is important to assess where the funds would come from to pay for other expenses should your income be lost. If savings or family cannot be relied upon then borrowers should seriously consider taking out additional cover, provided it is within their budget of course.