Mortgage payment protection insurance covers your monthly mortgage repayments if you’re unable to pay them under certain circumstances. If you become unable to work and have a lack of funds flowing into your bank, it can prevent you from the lender being able to repossess your home. Below are some situations in which mortgage protection insurance will pay-out for.
- Crucial illness
- Serious injury
- Redundancy
If you opted for a package that covered other costs, such as bills, your mortgage protection policy will start to pay 125% of your mortgage. If you only chose a mortgage payment cover only, it will pay enough to cover your monthly mortgage costs. Freeing up mortgage payments will ensure you’re able to pay other monthly running costs of your home. Both of which take effect after being out of work for around 30 to 60 days.
How Long Will You Be Covered For?
Depending on your policy, you’ll only be covered for a certain period of time. This is typically around 12 to 24 months depending on your plan. However, you can expect to pay more for your insurance if your plan has extended coverage.
A common misconception people have with mortgage protection insurance is that they believe it’s similar to payment protection insurance (PPI). This is completely incorrect as a mortgage protection policy will provide payments directly to you instead of the lender.
Do You Need Mortgage Protection Insurance?
MPPI is not enforced by the government, therefore it is not needed. It is, however, recommended to get this coverage in the unfortunate event that you become unable to work. Finding yourself out of work for an extended period can cause a boatload of stress and having this insurance can reduce it dramatically.
There are also several alternatives when it comes to mortgage protection insurance that covers you in a more in-depth way, depending on your circumstance. These are below:
Life insurance
Depending on your situation, life insurance may provide you more benefits than mortgage protection. Although MPPI will give you pay-outs if you’re ill or injured, life insurance will provide your family and loves ones with a pay-out after your death to ensure they’re able to cover bills, even after the decreased amount of household income.
Critical illness cover
If you become seriously ill or injured and unable to work for the rest of your life, critical illness cover is the type of insurance policy that’ll provide you with that much-needed support during your life-changing situation and give you compensation towards most of your outgoings. You can learn more about critical illness cover on The money advice service.
Income protection
This type of insurance typically provides you with a percentage of income each month if you’re unable to work due to a sickness or injury until you’re able to return back to work or retire. Depending on your coverage, you can get pay-outs each month of up to 85% of your pre-tax income. The time frame this can last for also depends on the policy you choose.
Having insurance in case of an unfortunate event that covers your family and possessions is particularly important. Live with confidence knowing you’re able to provide for your family and loved ones in the event of you becoming ill or critically injured.
James Banerjee is an Account Director who graduated from the University of Kent in 2014. He works in SEO on clients such as HSBC UK and Nestle and he has a keen interest in personal finances and money-saving advice.
