Payment
Protection Insurance
The terminology surrounding this type of insurance can be confusing in the extreme. This is what we mean by the various terms :-
Mortgage Protection Life Cover - This pays off your mortgage in the event of your death. A terminal illness option can normally be added for a small charge.
Mortgage Protection Insurance - Continues to pay your mortgage payments during unemployment or disability. Payments are made for a maximum fixed term, usually one or two years.
Payment Protection Insurance - Sometimes known as Income Protection Insurance. Similar in many ways to Mortgage Protection Insurance, this is a more flexible cover that can be used for any number of purposes. The main differences between the two types of policy are outlined below :-
- Mortgage protection insurance benefits are paid directly to the lender i.e. the building society or bank that granted the mortgage, whereas payment protection benefits are payable directly to you.
- Payment protection benefits can be used for any purpose. Amongst other things, they can be used to pay mortgage repayments, but the premiums for simple mortgage protection insurance are sometimes cheaper.
- Mortgage protection insurance can cover 100% of your mortgage payments up to a maximum of 65% of your normal income. Payment protection can cover up to 75% of your income.
- It is not unusual for a customer to take out both types of policy, one to cover mortgage payments, the other to pay loans etc and to provide living expenses in the event of a claim.
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