What Is Mortgage Payment Protection Insurance?

Mortgage payment protection insurance (MPPI), often known as mortgage protection insurance or mortgage life insurance, is designed to pay off your mortgage if you pass away during the mortgage term. This type of insurance helps you to keep your family in their home even in the event something happens to you.

Mortgage Payment Protection Insurance: Key Areas of Coverage Explained

Does Mortgage Payment Protection Cover Death?

The main purpose of mortgage payment protection insurance is to cover your mortgage in the event you die during the mortgage term before the loan is paid off. Your beneficiaries receive a lump sum payment that they can use to pay off the outstanding balance on the mortgage. This means they can stay in the property and don’t have to worry about meeting the mortgage payments you maintained.

Insurance Mortgage Payment Protection and Comprehensive Coverage

Mortgage payment protection insurance (also known as mortgage life insurance) is extremely flexible and can often be combined with other policies to offer comprehensive coverage, such as accident and sickness and unemployment protection. This ensures that you’re covered for a wider range of scenarios that could impact your ability to make mortgage payments, not just if you pass away during the mortgage term.

You can also take out these other policies without the life insurance element, which will obviously reduce your coverage but can be more suitable if you don’t have any dependents who live in your home with you.

Does Mortgage Payment Protection Cover Accident and Sickness?

While standard mortgage payment protection insurance primarily covers the mortgage if you die within the term, you can tailor your policy to cover accidents and sickness as well, or even instead of this. Accident and sickness cover means if you’re unable to work due to an illness or injury, your mortgage payments continue to be made.

Here’s how accident and sickness cover works as part of a mortgage protection policy:

  • Inability to work - if you suffer from a serious illness or injury that prevents you from working, the insurance will cover your mortgage payments
  • Medical certification - to make a claim, you will typically need to provide medical documentation certifying your condition and your inability to work
  • Benefit period - payments are made for a specified period, which is usually between 12 and 24 months, depending on the policy

Does Mortgage Protection Cover Redundancy or Unemployment?

Unemployment coverage is another element you can include in your mortgage payment protection insurance policy. This protection is designed to help you maintain your mortgage payments if you lose your job through no fault of your own.

Key points include:

  • Job loss - if you’re made redundant or lose your job due to downsizing or company closure, the insurance will step in to cover your mortgage payments
  • Claim requirements - you will need to provide evidence of your redundancy, such as a redundancy letter, to make a claim
  • Coverage duration - similar to accident and sickness coverage, the insurer will make payments for a predetermined period while you look for new employment

Does Mortgage Protection Cover Critical Illness?

You can certainly get mortgage protection to cover critical illness only, or as part of your wider mortgage protection insurance policy. This protection pays out if you’re unable to work due to a critical illness.

Key points include:

  • Critical illnesses such as - cancer, heart attack, stroke, major organ transplants, kidney failure, multiple sclerosis
  • Medical certification - to make a claim you’ll typically need to provide medical documentation certifying your condition
  • Coverage - critical illness is normally based on an amount rather than duration of coverage. This means that the insurer will typically pay a lump sum once you’ve been diagnosed

Additional Benefits of Mortgage Payment Protection Insurance MPPI

Beyond the primary coverage areas, some mortgage protection policies may offer additional benefits, such as:

  • Hospitalisation benefit - if you're hospitalised for an extended period, some policies provide additional financial support
  • Rehabilitation support - assistance with rehabilitation costs to help you recover and return to work

Exclusions and Limitations of Mortgage Payment Protection Insurance

It’s important to be aware of the exclusions and limitations that may apply to certain mortgage protection insurance policies:

  • Pre-existing conditions - many policies exclude pre-existing medical conditions, so it’s crucial to read the policy details carefully
  • Voluntary unemployment - if you leave your job voluntarily, you typically cannot claim unemployment benefits.
  • Waiting periods - policies such as sickness and accident and redundancy cover often have a waiting period (e.g. 30 or 60 days) before benefits begin, during which you will not receive payments

How Much Is Mortgage Payment Protection Insurance?

Understanding Mortgage Payment Protection Insurance Costs

Mortgage payment protection insurance (MPPI) provides a financial safety net by covering your mortgage if pass away during the mortgage term. Policies can be tailored to cover additional or alternative scenarios, such as if you cannot work due to illness, injury, or unemployment.

The cost of MPPI varies based on several factors, making it essential to understand what influences the premiums.

Factors Affecting the Cost

  1. Coverage type:
    • Death only - pays out a lump sum to pay off the mortgage if you die within the policy term
    • ASU (accident, sickness and unemployment) - covers mortgage payments if you can't work due to illness, injury, or involuntary unemployment. This comprehensive coverage is generally the most expensive
    • Critical illness cover - covers the mortgage payments if you’re unable to work due to a critical illness such as cancer, major organ transplants, etc. Typically functions as a lump sum paid out once you’re diagnosed
    • Accident and sickness only - covers mortgage payments only if you're unable to work due to illness or injury. This option is cheaper than ASU coverage
    • Unemployment only - covers payments if you lose your job. This is also generally cheaper than ASU coverage
    • Comprehensive - this can include any combination of the above. Obviously the more coverage you have, the more expensive the premiums. Although it’s worth noting that insurers may offer discounts for certain bundles to provide you with the best coverage at a competitive price
  2. Benefit amount:
    • The amount you want to be covered (e.g., the full mortgage payment or a portion of it) directly impacts the cost. Higher benefit amounts result in higher premiums
  3. Benefit period:
    • The duration for which benefits will be paid (e.g. 12 months, 24 months, or until you can return to work) affects the premium. Longer benefit periods typically increase the cost
  4. Waiting period:
    • The waiting period (or deferment period) before the benefits start to be paid can range from 30 to 180 days. A longer waiting period usually results in lower premiums.
  5. Age:
    • Younger policyholders generally pay lower premiums as they are considered lower risk compared to older individuals
  6. Occupation:
    • Your job type can influence the cost. Higher risk occupations (e.g. manual labour) may attract higher premiums due to the increased risk of injury or illness
  7. Health status:
    • Generally, MPPI does not require detailed medical underwriting like traditional life insurance, but pre-existing conditions can influence the cost and availability of coverage
  8. Policy features:
    • Additional features and riders, such as inflation protection or premium waivers, can add to the cost

What Makes MPPI Cheaper?

  • Opting for a longer waiting period - choosing a longer waiting period for illness, accident or redundancy cover can reduce premiums
  • Lower benefit amount - covering a portion of your mortgage payments rather than the full amount will lower your premiums
  • Limited coverage - for example, opting for accident and sickness only or unemployment only coverage instead of comprehensive ASU coverage will be cheaper
  • Younger age - younger applicants typically receive lower rates so it’s worth taking out your cover earlier rather than later

Get a Mortgage Payment Protection Insurance Quote with John Charcol

At John Charcol, we understand that choosing the right mortgage payment protection insurance is essential for securing your financial future. Our experienced advisors can help you navigate the options and find a policy that meets your specific needs. We work with a range of reputable insurers to provide competitive rates, bespoke deals and comprehensive coverage.

Our team will guide you through the entire process, from selecting the right policy to assisting with any claims, ensuring you have the support you need during difficult times. Contact us on 0333 363 6507 to learn more.

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