Why mortgage protection is more important now than ever before

Mortgage payment protection insurance covers the cost of your mortgage payments if you become unwell or lose your job. Find out if it’s likely to be a good option for you.

Your mortgage is most likely your largest monthly outgoing. Even if you were unable to work due to illness or redundancy, you would still be required to make your mortgage payments or risk losing your home.

You have two main options for protecting yourself: you can get protection insurance specifically designed to cover your mortgage payments, or you can get general income protection insurance (where the payments you would receive could be used for anything).

Mortgage payment protection insurance (or ‘MPPI’) allows you to keep paying off your mortgage even if you lose your job.

Looking to buy protection insurance? 

If you decide you need help, make sure you consult with an independent life insurance broker. Which? Financial Services can refer you to an unbiased, no-obligation third-party advice service that can provide you with an ideal mortgage insurance policy tailored to your specific needs.

What are the various types of MPPI?

There are three primary types of mortgage payment protection insurance: ‘unemployment only,’ ‘accident and sickness only,’ and ‘accident, sickness, and unemployment.’

What is the cost of mortgage protection insurance?

The cost of mortgage insurance will vary depending on factors such as your age and the amount of your mortgage repayments. Accident, sickness, and unemployment mortgage payment protection insurance is more expensive than unemployment-only or accident and sickness-only policies for obvious reasons.

How much will mortgage protection insurance pay out?

Insurers will pay you a fixed monthly amount for a period of up to two years. 

You may be able to choose how your policy pays out depending on the provider. For instance, you may want the policy to only cover the cost of your mortgage payments, or you may want it to cover the cost of other bills as well. 

If you choose the latter, lenders will typically pay 125% of your mortgage costs. You can also base the coverage on your salary. Typically, providers will pay up to 50% of your monthly salary. If you have been out of work for more than two years, MPPI may not meet all of your needs, and an income protection insurance policy may be more appropriate.

How long do I have to wait before I can claim MPPI? 

Before you can file a claim, you must be out of work for a certain number of days. This is known as the waiting period or excess period, and it can last anywhere between 30 and 180 days.

If your employer provides sickness benefits or you have some savings you could rely on for a few months, you may want to take out a policy with a longer waiting period.