Consider mortgage payment protection insurance as a vital safety measure, providing a cushion to cover your monthly mortgage payments in case you encounter financial challenges due to various circumstances. This insurance serves as a shield against defaulting on your mortgage, thereby safeguarding your home from potential repossession. However, before opting for this protection, it’s crucial to assess whether it aligns with your needs or if there are alternative solutions that may be more suitable.
Mortgage protection insurance, also known as mortgage payment protection insurance (MPPI), steps in to cover your mortgage repayments if you’re unable to work due to illness, severe injury, or redundancy. Typically, after a waiting period of at least 30 days (which can extend up to 180 days), the insurance provides you with a predetermined monthly sum. Some policies also offer coverage for additional bills, often equivalent to 125% of your mortgage.
It’s important to note that most policies include an exclusion period, requiring you to have the policy in place for a certain duration before you can make a claim. Additionally, benefits are usually provided for a maximum of 12 months or until you’re able to return to work, depending on the policy terms.
Distinct from payment protection insurance (PPI), mortgage protection insurance specifically targets mortgage repayments, ensuring that if you need to make a claim, the payments are directed to you rather than your lender.
How Much Will It Cost Me?
Typically, monthly premiums for mortgage payment insurance range from £20 to £25, though deals can be found for as low as £10 or as high as £40 per month, depending on various factors. These premiums are calculated based on individual circumstances such as age, salary, mortgage repayments, and occupation. For instance, individuals in desk-based roles, which pose lower risks of serious injury compared to manual labour, may benefit from lower premiums.
As with any insurance, the level of coverage directly influences the cost of premiums. Opting for a higher coverage level or shorter waiting period, as well as coverage for a wider range of scenarios that could hinder your ability to work, will increase the premium amount.
Moreover, policies offering “back-to-day-one” coverage, which retroactively cover you from the date you stopped working rather than the date of your claim, tend to be more expensive. It’s essential to carefully evaluate your coverage needs and financial constraints when selecting a policy.
Mortgage protection insurance comes in three primary types, each tailored to address specific circumstances:
Unemployment policies
These policies provide payouts solely in the event of redundancy, offering financial support if you lose your job involuntarily.
Accident and Sickness Policies
Designed to offer coverage if you’re unable to work due to serious illness or injury, these policies provide financial.
Combined Policies
Some insurers offer comprehensive coverage by combining both unemployment and accident/sickness protection in a single policy. This option ensures broader financial security, encompassing various scenarios that may affect your ability to meet mortgage payments.
When considering mortgage protection insurance, it’s essential to evaluate your individual circumstances and needs to determine which type of policy provides the most suitable coverage for your situation.
