THE GOOD THE BAD AND THE ESSENTIAL.

Mortgages are much in the news these days. Like all aspects of personal finance, there are many facets to it and one of the most important in home ownership is Mortgage Payment Protection. This has had a bad press but as The Financial Services Authority says, "there's nothing more important than protecting your mortgage" so it's worth taking a balanced view.

What is MPP

Mortgage Payment Protection is essentially an insurance policy that will make your mortgage payments for you should you be unable to keep them up yourself. You may have a period out of work, or suffer an illness, or an accident that prevents you working for a while

Why is it important?

Keeping the roof over your head safe and secure is an important priority for most homeowners from a peace of mind viewpoint. If there is an interruption in your income you could build up arrears that you would have difficulty repaying or at least have worries about. And with most of the population having minimal savings it's important to consider what you would do in such a circumstance.

Some of the reasons MPP has become important are: in uncertain times job changes or redundancy are more common, higher mortgage borrowings mean you may not be able to use savings , accidents and ill health do happen. And these days the State provides much less support than it used to: there is now a 9 months wait for state mortgage payments to kick in and there are additional restrictions so that the help may be limited. Only the capital element is covered, not the interest, and if you have savings over £8000 you wont be covered. And only the first £100000 is covered.

Is it difficult to get

Not especially. There are many companies in the field and most intermediaries arranging your mortgage or lenders will also offer it. MPP should not be made a condition of you being offered a mortgage. It can be paid by a single premium or monthly premiums and is available from insurance brokers as well as mortgage brokers. Some policies can be cancelled and a portion of the premium returned - check with your insurer.

What is not covered?

Most policies will not cover you if you know that you are going to be made redundant when you take out the policy. Policies will not usually cover unemployment occurring within an initial period usually something like 60-120 days.

Claims arising from pre-existing medical conditions are also usually ruled out. That will cover conditions you knew about or could reasonably be expected to have known about when you took out the policy. If you'd arranged to see your doctor shortly beforehand that condition could also be excluded.

Claims arising from drug, substance or alcohol abuse will not be covered.

Like all insurance policies you need to give honest answers as Insurers may not pay out if they find inaccuracies on your application form.

How long do policies pay out for?

That varies from insurer to insurer but usually it's in the region of 12 to 24 months but longer terms may be available. If it's important to you, shop around.

What should I look out for?

Check the benefit amount covers your monthly payments and any exclusions. Read the policy document carefully. Some Homeowners have been sold policies which don't cover their payments or have exclusions which make the policy pointless. For example pre existing medical conditions which would bar a claim for illness.

What happens if I'm self employed?

There are policies which will cover the self employed but some won`t pay out if you become voluntarily insolvent. Invariably you must inform HM Customs and Revenue that you have ceased trading. Your claim will not usually be met until you meet the criteria for job seekers allowance or can prove you are making National Insurance contributions..

It's an essential.

PPI provides a useful safety net and could help keep your home... Government guidance on the subject is clear "If you have a mortgage or are about to take one out, you should think seriously about how you would meet your mortgage repayments if you lost your income, say through unemployment or ill health". You could say it's an essential to protect you in an uncertain world. The price for peace of mind may well be worth paying.