A large number of people often ask if mortgage payment protection insurance (MPPI) covers death. On its own the answer is no, it is not designed to cover death. In this respect a claim cannot be made on a payment protection plan if someone dies. MPPI is often combined with life and critical illness insurance which would cover both death and serious illness or injury.
What does MPPI cover?
Payment protection is a short-term policy designed to cover the financial risk of incapacity or redundancy but not death. The main areas of cover for MPPI consist of the following:
- Accident: If you were to suffer an accident that prevented you from working then you would generally be covered by the policy;
- Sickness: As with the case for suffering an accident, sickness that prevents you from working is also covered by the policy;
- Unemployment: If you were to suffer forced redundancy you would generally be covered by your MPPI policy.
The most notable exclusions to this policy is with regard to pre-existing medical conditions for accident and sickness cover and prior knowledge or expectation of redundancy for unemployment protection.
What covers death?
If you are looking to take out a policy that would enable your mortgage to be repaid should you pass away then you should take out mortgage protection life insurance. This type of policy can be set up to cover either a repayment loan (level term life cover) or an interest only loan (decreasing term life cover). The plan can also be taken out as a joint policy so that both partners on a joint loan can be protected against the risk of the other partner passing way.
What covers serious illness?
For added protection you can also include critical illness cover on your life insurance plan. This addition to the policy would allow a payout to be made should you suffer a serious illness, such as cancer for example. The policy would also cover serious injuries, such as paralysis or the loss of a limb.
Ideally, for complete mortgage protection purposes, someone with a home loan should take out all three policies. This combination of plans would therefore provide protection against the risk of accident, sickness and unemployment in the short-term and serious illness, injury and death in the long-run.