Mortgage Protection Insurance - MABS Investigates
13th May 2020
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In MABS we receive a lot of great questions. Questions that we know many people want to ask, but don't know who to ask or where to start. This week's question is to do with Mortgage Protection Insurance and whether you should continue to pay it if you apply for a mortgage payment break.
Click the question below to go to the answer you'd like to read or continue scrolling to read them all
- What is Mortgage Protection Insurance?
- Where Can I Get Mortgage Protection Insurance?
- I’ve applied for a mortgage repayment holiday, will my MPI automatically stop too?
- Mortgage Protection Insurance – COVID-19 (coronavirus) Temporary Provisions
Mortgage Protection Insurance (MPI) is an insurance policy that pays off the remaining mortgage where an insured party dies during the term of the mortgage. If there is a joint mortgage in place, both parties will need MPI. This insurance runs for the duration of the mortgage and is usually paid along with the monthly mortgage repayment.
MPI should not be confused with Income Protection Insurance. Income Protection Insurance is a separate cover where an insured party is covered for loss of income resulting from redundancy, sickness or disability.
A lender is obliged to ensure the borrower has MPI cover is in place when a mortgage is taken out. There are exceptions, such as another suitable life cover is in place, the property is for investment purposes or where a person is over 50 years old.
There are various forms of MPI which we have summarised below. Each should be researched as to your personal circumstances and suitability:
- Reducing Term Generally the cheapest option, where the policy cover reduces in line with the outstanding mortgage balance.
- Level term A level premium is paid giving you the same amount of cover throughout the life of the mortgage, and there may be a balance available to pay-out, to the estate of the holder.
- Serious Illness Some policies may provide for a pay-out, on a defined serious illness.
- Life Insurance Policy An existing Life policy may be considered as suitable security provided this policy has not been used to secure any other form of debt or investment.
MPI Policies are obtained through an insurance broker, mortgage provider or can be secured direct and assigned against the mortgage. It is important to note that MPI is specific to the mortgage granted. In the event of any transfer, new mortgage lending or early redemption, a new policy is required. MABS would recommend that you seek independent financial advice if you are looking to take out an MPI policy.
No. See the next paragraph for more information on this from Insurance Ireland, the representative body for insurers in Ireland.
Insurance Ireland has advised the following in relation payment breaks on MPI:
"In general, our members are supporting customers who are struggling to pay their mortgage protection policy premiums at this time by offering a payment holiday. However, they do need to contact the insurer directly – it won't automatically happen once they obtain a payment holiday on their mortgage."
The Insurance Ireland website states that there are several measures that may be available from your life insurance provider to assist you to continue with your policy if you are experiencing financial difficulties. Insurance Ireland advises that many insurers may offer a payment holiday or a reinstatement option. A payment holiday will allow for a deferral of the monthly premium for a specific period without losing cover. A reinstatement option will allow the policy to be reinstated after a period of missed payments with little or no updated underwriting required.
There are no specific references as to qualification for payment under the reinstatement measure. Therefore, anyone with Mortgage Protection Insurance must check specifically with their provider to confirm that adequate cover is in place throughout the period of your mortgage. This could include an extension to your mortgage term. It is also advisable that you check with your mortgage lender also that the loan is fully covered.
Have you got a money or debt advice question that you'd like answered? Get in touch, and we'll give you a clear and accurate answer to your money and debt advice questions.
You can contact your local MABS office , chat through our live chat or call the MABS Helpline on 0761 07 2000, Monday to Friday, from 9am to 8pm or you can check the MABS website for further updates and guidance.
Disclaimer: While every effort is made to make sure this information is accurate and correct, we strongly recommend that you contact your MPI provider and satisfy yourself that adequate and full cover is available under this form of insurance (or any other type of insurance).
This blog does not represent legal advice and is intended for guidance only. If you are concerned about your current or future personal financial situation then please contact a money adviser from MABS. All face-to-face consultations are currently suspended, however advisers are available by phone and email and through our live chat. Contact details are available here.