Mortgage payment protection insurance explained
Why take out mortgage payment protection insurance?
Mortgage protection insurance, also known as mortgage payment protection insurance (MPPI), is designed to pay an amount equivalent to your monthly mortgage repayments should you be unable to work due to an accident, sickness or unemployment. It is suitable for those who would struggle to meet their repayments if they were out of work, those that are self-employed and anyone who does not have another insurance policy in place to protect them against a loss of earnings. Though state benefits are available, you normally have to be incapacitated or unemployed for a prolonged period before this support begins. By contrast, mortgage protection (MPPI) is usually offered on a short-term basis, typically for 6 - 24 months.
What cover options are available?
When taking out mortgage payment protection insurance there are several options available:
- Accident, sickness and unemployment insurance
- Accident and sickness only
- Unemployment insurance only
The cover MPPI can be used for both repayment mortgages and interest-only mortgages, and you may also be able to add on additional cover such as for other household bills and indemnities.
What should you look for when taking out mortgage protection?
In addition to the level of cover you require and the premium you will pay, you should also examine the terms and conditions carefully and look for exclusions – circumstances in which you will not be covered. Typically with mortgage payment protection insurance exclusions include: taking voluntary unemployment or unemployment that results from misconduct or dishonesty; pre-existing medical conditions; stress or back- related injuries and illnesses; and chronic medical conditions that cannot be cured. Also pay attention to the wait period, which is the length of time you need to wait after you have stopped work before you will receive a payout. You can normally choose the excess wait period when you take the policy out, – and a longer excess wait period will normally earn cheaper premiums, but you should ensure you could afford to comfortably meet your debts for the length of this period.
How to choose the right mortgage payment protection insurance policy
Mortgage protection can usually be bought from a bank, building society, financial adviser, insurance company or any other mortgage provider. However, you may be able to find a much cheaper policy by shopping around for mortgage protection independently. Just remember to examine the policy carefully to ensure it meets your needs as the cheapest deal is not always the best.
Be sure to enter all your information accurately, as omitting or providing inaccurate information may invalidate your claim. Before deciding to purchase a policy you should ensure that the terms of the policy meet your demands and needs.
For more information, read our mortgage protection insurance guide.
Our preferred provider
We have partnered with PMI partners*, our preferred provider for mortgage payment protection insurance, to help you choose the right deal to suit your needs.
