Mortgage Payment Protection Insurance

MPPI covers the mortgage costs each month should circumstances change, such as loss of job or illness. If the borrower is unable to work, MPPI could pay a set amount each month, which can be used to pay 125% of the mortgage to help with other bills for 6 to 12 months.

There are three types of mortgage protection, which are as follows:

Unemployment only – only covers the person if they’re made redundant

Accident and sickness – only covers the person if they have a long-term injury or suffer a serious injury.

Accident, sickness and unemployment – this covers you if you are made redundant and have a long-term illness/suffer a serious injury.

Term Assurance:

If you’re looking for simple straightforward life assurance, Term Assurance means you get the benefit of total protection for a limited period of time with absolutely no element of investment involved. For this reason, it is also the least expensive type of insurance.

The ideal product that meets the need for protection against premature death is Term Assurance. It is, in essence, a policy that provides cover over a certain amount of time – and this is called the policy term.

Usually, the cost of the premium for this particular item is quite low; however, you may find that it contains a high expense loading and an allowance for adverse selection.

Term Assurance can be used both for your family and for your own personal protection, as well as for a wide range of business scenarios. The reasons you might want to use it in business includes key person insurance, which protects your business against loss of profit in the circumstance of the death of a key member of the organisation, and partnership insurance schemes or enterprises, which enable the buyout of a deceased partner’s share(s).

This style of assurance provides the person with life cover for a previously agreed period of time. Should the policyholder die during this time, the policy will pay out a lump sum, thus providing a safety net or level of security for those dependent on the individual.

Key Features of Term Assurance

• The term of the policy can range from anything from a few months to 40 years or more; but for terms that end after the age of 65, it may be advisable to take out a whole-of-life policy instead.
• The assured sum is payable only if the death of the assured party occurs within a specified period of time (the term).
• If the life assured party survives the full term covered, the cover then ceases and there is no return of premiums.
• There is no surrender value or cash-in value at any point during the term.
• If premiums are not paid within a certain time after the due date (normally 30 days) the policy lapses, and the cover ceases and has no value. Most organisations will allow reinstatement of payments within 12 months, provided that all outstanding premiums are paid up to date and evidence of continuing good health is provided.
• Normally, premiums are paid annually or monthly, although a single premium payment (a sole payment to cover the entire term assured) is also permitted.
• Premiums are usually ‘level’, so the same amount is paid each month or year, even if the assured sum varies across different years.

Convertible term assurance

This type of assurance offers an option to convert the policy into an endowment or whole-of-life assurance at the normal rates of premium, without the life assured having to prove or provide details of their health situation at the time of the conversion, and without any requirement for any additional underwriting.

These policies allow changes, adjustments and conversions to be made into a permanent agreement without the bother of having to produce new evidence of the insurability of the person(s). It is beneficial to people who, ideally, would like to have permanent cash value insurance, but for one reason or another are not able to afford the higher premiums at the time they take out a policy.

This particular option is normally only included on level term assurance policies, but there is no reason technically why it should not be allowed to be included on decreasing term assurances.

It is quite useful to use this method as a person may not know exactly what they want to be included in the policy as a whole, and haven’t yet decided what to buy.

Once a policy has been converted, the level of protection cannot be altered in any way. The terms that a person is offered is based on their age, though their health is not taken into consideration at the time when the conversion takes place. The premiums will remain the same if the level of cover that was chosen at the start does too. Should the person not die before the end of the policy’s term is complete without any conversion, there will not be any pay out. As this particular type of insurance contract only provides cover until death, (plus the conversion option being taken into consideration) there is no surrender value. If payments are not maintained, the person’s cover will cease and there will be no refund of any kind. The typical cost of this addition is around 10% of the premium.

Rules and restrictions that apply to the conversion option:

• This option can only be implemented whilst the convertible term assurance is in effect.
• The conversion option is normally enacted by issuing a new whole-of-life or endowment policy and cancelling the existing term assurance. The new endowment can be extended beyond the original end date convertible term policy.
• The assured sum on the new policy may not exceed the sum assured on the original convertible term assurance, so, if a higher level of cover is required after the conversion, the additional amount will be subject to underwriting as normal.
• The new premium’s policy is the current standard amount for the new term, and for the age of the person assured at the date of conversion.