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Protection from the cold

ALIGN=”JUSTIFY”>Luxury may describe a lead crystal flute of the finest champagne, a Rolex watch or simply a long soak in a hot bath. But, where there is no job to go to, homeowners may face the prospect of having no roof over their heads, let alone a bath to relax in, if they cannot meet their monthly mortgage repayments.

Accident, sickness and unemployment mortgage protection plans, now known as mortgage payment protection insurance (MPPI), can help preserve homeowners' rights to little luxuries. But it has not been seen as essential by those on low incomes.

However, having MPPI can buy people time to find the right job &#45 not just any job &#45 after a redundancy. It also allows those who are off work because of sickness to concentrate on getting well rather than worrying about their mortgage. In 1999, the Council of Mortgage Lenders and Association of British Insurers joined forces to encourage a higher take-up of MPPI. This was supported by the Government, which is aiming for a take-up rate of 55 per cent of homeowners by 2004.

The economic uncertainty, which has resulted in a rash of redundancies, is making homeowners aware that the State will not pick up the tab if they lose their jobs, even where Department for Work and Pensions benefits are claimed. Figures from the Office of National Statistics show that the number of people claiming State benefits started to rise for the first time in 2001 during the fourth quarter. In September, there were 946,800 claimants, which had increased to 963,500 by December. IFAs also reported greater demand for MPPI policies at this time.

Sean Horton, director of IFA firm, Alder Broker Group, says: "We had a large increase up to the end of the year, between October and December 2001, but it's gone back down to a more normal level. I can&#39t say exactly what the reason for the increase was. It may have been due to September 11, the redundancies which hit the airlines first and that now people are more aware of MPPI." The awareness appears to have come from two fronts. Firstly, IFAs are under pressure to preserve their clients' income streams. Secondly, with the move towards the statutory regulation of mortgage advice, the case for MPPI must now be put forward to clients.

The new products section of Money Marketing online shows that product providers were busy showcasing their wares last summer. This peaked in August when six MPPI plans appeared from Norwich Union, Pinnacle Insurance and The Exchange and Insureyourmoney, both of which offered two each. But this died down during the autumn, with just one new entrant from The Mortgage Business appearing in September.

Product providers had their hands full in the fourth quarter as they were steering the increased interest in MPPI towards existing products. It took three months of inactivity before the most recent product, Goodfellows' mortgage safety net, came along in January 2002.

Cheaper products such as mortgage safety net are widening the appeal of MPPI and a survey by Abbey National in November 2001 shows this could be working. It found that people from all occupations are taking out MPPI.

Despite the trend towards diversity among MPPI policyholders, existing plans are often targeted at high earners and providers are not slashing premiums to tempt those on lower incomes. Instead, they are designing less expensive products offering a basic level of cover with limited choices in terms of deferred period and maximum benefit.

Of the seven new products which have appeared since August, the cheapest premiums are offered by Pinnacle Insurance's helpupay. It offers accident and sickness only cover from 93p for £100 of cover and full MPPI cover from £1.52 for every £100 of cover. The most expensive is The Exchange's easi protect plus, with premiums ranging from £4.50 to £5.95 for every £100 of cover.

For those on high incomes, price is less important than having a plan that is tailored to their individual needs. But, for homeowners on a small budget, MPPI is likely to remain an unwanted expense.

Even though the outlook for MPPI for the rest of the year looks rosy, the Government's target for 55 per cent of homeowners by 2004 could be a little ambitious.

Product Review

Securehealth keeps options open

SecureHealth has teamed up with Legal & General to offer options, a private medical insurance (PMI) plan that can be tailored to the needs of different age groups. Options plan individual offers cover for single people, couples and families. It has six options, which can be bolted together if an upgrade is needed. Cover can also be downgraded if circumstances change.

Option one refers to basic in-patient and day-care cover, which includes hospital accommodation charges, tests, radiotherapy, chemotherapy, operating theatre fees and the cost of medicines used in hospital. Option two provides out-patient cover for specialist consultations and diagnostic procedures up to £1,000, while option three provides full cover for this.

Option four covers therapy treatment up to £1,000 while option five covers psychiatric treatment, but it is only available alongside options two and three. Option six provides additional benefits including childbirth complications, NHS cash benefits and parent accommodation charges.

Premiums range from £13.64 to £128.20 a month depending on a person's age and the type of cover they require. The policy carries a compulsory excess of £100 with the choice of paying a higher excess to reduce premiums.

Some PMI plans charge double the excess if, for example, a claim begins in November and ends the following February because it falls between two policy years. The SecureHealth plan solves this problem by resetting the policy year whenever a claim is made. So a claim starting in November would mean the policy year would end the following November.

Options compares favourably with the recent hospital advantage plan from 21st Century Health Plans in that people can build up their cover in stages instead of taking all the benefits at once. But the 21st Century Health Plan offers more competitive premiums where the full range is required.

A 35-year-old with single cover would pay £48.26 with SecureHealth and £23.14 a month with 21st Century Health Plans for benefits including in-patient, out-patient, psychiatric, therapy and additional benefits.

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