How It Can Safeguard Your Home and Finances
Life is unpredictable, and your ability to work can change in an instant. Mortgage protection insurance, also known as mortgage payment protection insurance (MPPI), is designed to help cover your mortgage payments if you’re unable to work due to illness, injury, or redundancy.
What Is Mortgage Protection Insurance?
MPPI provides short-term income protection specifically for your mortgage. In some cases, you can add an extra 25% to cover household bills too. Some policies even offer joint mortgage repayment insurance, helping couples protect monthly payments if either partner cannot work.
This type of cover is particularly useful if:
• Being out of work would make it difficult to meet your mortgage repayments.
• You’re self-employed and aren’t eligible for sick pay or redundancy support.
It might not be necessary if you have generous sick pay, a large redundancy package, government support, or existing health insurance.
How It Works
Mortgage protection insurance works by paying a monthly benefit if you’re unable to work for a reason covered by your policy.
Benefit periods typically last between six and 24 months.
The monthly payout is usually capped, either as a set amount (e.g., £1,500–£2,000) or a percentage of your gross income (65–75%).
Policies often include a deferred period of 30–180 days before payments start, though some provide “back to day one” cover to backdate payments to the claim date.
What Does It Cover?
Coverage options vary depending on your needs:
• Accident and Sickness: Covers your mortgage repayments if you cannot work due to illness or injury.
• Unemployment: Provides payments if you’re made redundant.
• Comprehensive: Combines accident, sickness, and unemployment cover for maximum protection.
Example in Practice
Imagine a factory worker who suffers a serious illness and is off work for three months. Their employer’s sick pay isn’t enough to cover the mortgage. With accident and sickness MPPI, their monthly repayments continue, providing financial security while they focus on recovery. Some policies also cover those leaving work to care for an immediate family member.
Things to Consider
• Pre-existing conditions, elective procedures, and voluntary redundancy are common exclusions.
• Self-employed individuals may face stricter criteria for unemployment cover.
• Always read the policy carefully to understand what is and isn’t covered.
Alternatives to MPPI
• Other options can complement or replace mortgage protection insurance:
• Mortgage Life Insurance: Pays a lump sum to cover your mortgage in the event of death.
• Critical Illness Cover: Pays out if you’re diagnosed with a covered serious illness.
• Income Protection Insurance: Provides a replacement income if you cannot work due to injury or illness, which can cover more than just your mortgage.
Why It Matters
Mortgage protection insurance ensures your home and financial obligations are protected if the unexpected happens. Whether employed, self-employed, or in a high-risk role, it’s a safety net that can provide peace of mind for you and your family.
