Borrowers pay too much for protection

This is according to a survey by moneynet, based on an average homeowner in the South East with £102,000 borrowing over 25 years and industry average mortgage payment protection insurance premiums (Source: Insurance Times June 2002).

Over 2,534,000 of UK homeowners now have MPPI, the mortgage safety net in the event of a homeowner becoming redundant or suffering a serious illness or injury that keeps them away from work for a substantial period of time. However, premiums vary wildly between the providers. One of the most expensive on the market costs £5.99 per £100-worth of full cover and has a 30 day excess or 'waiting' period before benefit is payable. By comparison, one of the cheapest costs £3.95 for the same level of cover and has added benefits such as no excess period and the first three months' cover free.

Commenting on the survey, moneynet’s Richard Brown said: "Just because a mortgage payment protection plan is one of the most expensive, doesn't mean you are getting a better level of cover. In fact, the only difference in 99% of the cases is how much commission goes into the provider's pocket. People should be aware that they can shop around. If every policyholder switched to a lower cost policy, some £6 billion could be saved nationally over the term of an average mortgage.”