Mortgage insurance 'not for everyone'
With uncertainty surrounding the UK housing market, many more people will look to insure against missing a mortgage payment, though many will already be covered
As if homeowners didn't have enough to worry about, confusion is creeping in over the issue of Mortgage Payment Protection Insurance (MPPI).
On the one hand, the Financial Services Authority (FSA) has warned that as many as one million Britons could be at risk from repossessions as the full impact of the credit crunch hits home.
On the other hand, however, a recent report from the consumer watchdog Which? claimed that Britons are collectively wasting millions of pounds every year on unnecessary insurance policies.
A sizeable number of the policies taken out simply provide added 'peace of mind', with the majority of what they cover already taken care of by existing legislation or home contents and health insurance, the report concluded.
Therefore, is MPPI just another gimmick designed to take advantage of nervous homeowners or is it a vital shield designed protect against these ncertain economic signs?
The answer is that it can be a bit of both, depending on a homeowners situation.
According to Belgravia Insurance Consultants, MPPI policies are often sold to the "wrong people".
As Paul White, a consultant at the company explains: "For example, a policeman wouldn't need it as they have excellent sickness benefits and are extremely well covered."
In comparison, those who are self-employed or whose jobs offer only a minimal benefits package, would "definitely need it".
However, the advantage of many existing MPPI policies is that they allow homeowners to take a selective approach to what they sign up to, again dependent upon their employment and financial circumstances, though as Mr White added: "The difficulty with that is that X,Y,Z provider may not be the best in the particular field that you are trying to cover and on".
Overall, it is definitely best to adopt the same policy for all types of insurance, whether it be policies concerning MPPI pets or cars.
"Instead of just blindly following what the salesman says, people should carry out a risk assessment of their own and make an informed choice about whether they actually need the insurance, and whether it’s worth the premium," concluded Tony Levene, personal finance journalist and author of the Which? report.
