Mortgage protection insurance

What is mortgage payment protection insurance (MPPI)?

Mortgage payment protection insurance (MPPI) is a type of cover that pays out a monthly income if you can’t work due to:

• Accident
• Illness
• Involuntary unemployment

Rather than paying off your mortgage in full, MPPI helps you keep up with your monthly repayments for a limited period while you recover or look for new work. As such, it could provide a useful financial buffer while you get back on your feet.

Do I need mortgage protection insurance?

MPPI isn’t compulsory, but – depending on your circumstances – it could certainly prove valuable.

You might want to consider it if:

• you’re self-employed and don’t have access to sick pay
• your employer only offers Statutory Sick Pay (SSP)
• you have limited savings to cover your mortgage
• you rely on a single income to meet household bills

If you already have strong financial protection – such as savings, income protection or employer benefits – you might not need MPPI. Otherwise, if you meet any of the criteria above, it’s definitely worth giving it some thought.

What risks does MPPI cover?

Policies are usually available in different levels of cover:

• Accident and sickness – pays out if you’re unable to work due to illness or injury
• Unemployment – covers involuntary redundancy
• Accident, sickness and unemployment (ASU) – a combined policy offering broader protection

Choosing the right level of cover will largely depend on your job security, health and financial situation.

How long do payouts last?

MPPI is designed as a short-term safety net, not a long-term income replacement.

Most policies pay benefits for:

• 12 months, or
• up to 24 months

This can give you time to recover from illness or find new employment without immediately falling behind on your mortgage.

What is the deferred period?

The deferred period is the waiting time between making a claim and receiving your first payment.

Common options include:

• 30 days
• 60 days

Choosing a longer deferred period can lower your premium. Although you’ll need to cover your mortgage payments yourself during that time, so think carefully about what best suits your circumstances.

What’s the difference between MPPI and mortgage life insurance?

Despite sounding similar, MPPI and mortgage life insurance serve different purposes:

• MPPI pays a monthly income if you’re unable to work due to illness, injury or unemployment
• Mortgage life insurance (often called decreasing term cover) pays a lump sum if you die during the policy term

In short, MPPI helps you keep paying your mortgage while you’re alive. On the other hand, this type of life insurance helps pay off the mortgage if you die.

What affects the cost of MPPI?

The cost of mortgage protection insurance varies depending on several factors:

• Level of cover – higher monthly payouts are likely to mean the premium costs more
• Deferred period – shorter waiting times also usually mean higher premiums
• Employment status – self-employed workers could pay more due to higher risk
• Age and health – these can also influence pricing

It’s important to balance affordability with the level of cover you’d need in a worst-case scenario.

What isn’t covered by mortgage protection insurance?

As with most insurance policies, there are exclusions to be aware of.

Common exclusions include:

• Pre-existing medical conditions
• Stress-related illnesses, depending on the policy
• Resignation, voluntary redundancy or dismissal for misconduct
• Known redundancy at the time of taking out the policy

Claims can also be rejected if you don’t meet the policy’s terms, so it’s important to read the details carefully.