Mortgage Payment Protection Insurance (MPPI) was ‘caught in the crossfire' of the PPI scandal. With the market contracting to a handful of providers, Fiona Murphy asks, does MPPI still have a place for consumers?
However, Dean Mason, principal of Masons Financial Planning says: “MPPI policies are underwritten at claims stage whereas these are underwritten upfront. They ask a couple of simple eligibility questions but you don’t know what the client’s circumstances are and the insurance company could say we won’t pay because you don’t qualify, you didn’t tell us you had suffered from this, when they haven’t asked. That’s the fundamental problem I’ve always had with MPPI.
If it’s underwritten at application stage, you know where they stand. It’s unfair on the client because it gives the insurance company an opportunity not to pay out.”
“If somebody is looking for redundancy protection, what I generally do is roll it in with policies such as Scottish Provident or Prudential’s where you have to take out life cover. I usually use the mortgage add on.”
Othe alternatives
Aside from such bolt-ons, advisers are more typically using IP policies, or other alternatives to traditional MPPI, to cover the potential of long periods of unemployment through sickness or absence.
Aldridge adds: “You’re starting to see short-term income protection (IP) policies morph into that space. There is an argument that the accident part of what was the Accident, Sickness and Unemployment (another term for MPPI) contract depending on could be advantageous and cost-competitive for blue-collar workers. However, on the whole, accident and sickness part could be more robustly covered under an IP policy.
“There are providers who will allow you to bolt on unemployment cover to their term assurance or standalone income protection policies. We do use Cardif Pinnacle but we don’t sell the product, we put it in the mix for a broader protection conversation. We say to our advisers, you’re not incentivised on it, you just should be putting your clients in an educated position. ”
Mark Jones, head of protection at LV= says: The best way of thinking about our Mortgage and Lifestyle Protection product is it’s a good long-term income protection product much like our standalone income protection product but it has the option of adding guaranteed premium unemployment product alongside it. I believe it’s the only one available.
“With a lot of the MPPI products, their reviewable products can actually change and there are different – also the plans tend to be cancellable as well, whereas this is a long-term income protection product which is fully underwritten up front and is designed for the mortgage or rental market.”
