What is Mortgage Protection and What is are the Benefits?
Mortgage Protection Insurance (M.P.I) is a type of life insurance policy that compensates the mortgage balance in an event of death, critical illness, disability or retrenchment of the policy holder.
While Domestic Insurance protects your house against damages such as fire and theft, in mortgage protection insurance, the lender uses his/her compensation to offset the mortgage balance and should there be any left over, it will be passed to the deceased estate.
This occurs if any of the events insured against occurs. The insurance agency pays pays the policy benefits directly to the lender. In this case, the borrower’s dependants are left with a home unencumbered with mortgage debt.
M.P.I also compensates mortgage balances under the following circumstances:
1. Permanent total disability due to accident or sickness rendering a debtor totally unable to follow occupation by the virtue of their training or experience. This disability should have been in existence for at least six months without any interruption.
2. Critical illness cover of up to 30 percent of outstanding loan up to a maximum of Ksh. 5 Million.
3. Maximum age at entry is 70 years while retirement age for all borrowers is 75 years.
Usually, M.P.I is arranged for borrowers who quality for mortgage loans and it runs for the same duration of time as that of a mortgage loan a borrower has applied for.
Upon application, the borrower will be required to submit a duly completed application form
Medical examination shall be required for loans in excess of Ksh. 25 Million.
Loans exceeding Ksh. 25 Million will be automatically covered without medical reports.
Borrowers who opt not to submit medical reports will have their covers restricted to Ksh. 25 Million.
Upon the death, disability, critical illness or the occurrence of any of the factors insured against, the claim shall become payable to the financial institution/lender. The following documents will be required depending on the type and nature of claim:
1. A duly completed claim form
2. Identification document or a letter of surrender of ID
3. Borrower’s loan payment statement
4. In case of death the beneficiaries will provide original death certificate and certified true copy of burial permit.
5. In case of retrenchment, a letter from the employer addressing the same.
6. Medical report from attending doctor in respect of permanent disability and critical illness.