What Does Mortgage Payment Protection Insurance Cover?

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.

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.

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

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

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