Mortgage Payment Protection Insurance

Accidents do happen and sometimes life doesn’t always go to plan

Your mortgage is likely to be one of if not the biggest expenditure of your household, and most people would struggle to pay if they were unable to work, putting them at risk of losing their home.

Over the length of your mortgage loan you could face a number of misfortunes that may prevent you from repaying your loan in full. Accidents do happen and sometimes life doesn’t always go to plan, which is where a Mortgage Payment Protection Insurance (MPPI) policy can step in to help.

What is MPPI?

Like most other forms of insurance, MPPI is designed to protect you from financial loss in circumstances that are usually associated with significant personal costs. In this case, it can cover the cost of your mortgage payments if you become unwell or lose your job, so that you won’t lose your home.

What is covered by MPPI?

You can choose between several different types of cover:

  • Accident and sickness MPPI offers protection if you’re unable to work because of a long-term illness or injury
  • Unemployment MPPI offers protection if you are made redundant
  • Accident, sickness and unemployment MPPI offers protection in either case

What isn’t covered by MPPI?

Some illnesses aren’t typically covered by MPPI (often including mental health issues and stress), and if you have an illness or injury that you’re already aware of when you take out the insurance, you won’t be covered for that either. You’ll need to check specific exclusions with your MPPI provider.

Since MPPI is intended as protection for people with a regular income from employment or self-employment, it won’t usually cover people who are unemployed or retired.

Do you need MPPI?

MPPI isn’t compulsory, and some people are hesitant to take on the additional expenditure.

Think about what you would do if you had a long absence from work due to illness, injury, or redundancy. Would your family be able to pay your mortgage without your income? Would your redundancy payment, employee benefits, or statutory sick pay be enough to pay your mortgage? Do you have savings that you could use? How long would your savings last?

Asking yourself these questions will help you decide if MPPI is a necessary expense. 

How much does MPPI cost?

MPPI monthly premiums can cost very little, but rather than simply choosing the cheapest option, you should obtain professional expert advice to check that it covers everything that you need. This will include looking at the cover type, excess period, cover amount, and exclusions.

How much does MPPI pay out?

When you set up your insurance policy, you’ll choose the amount you’d like to receive if you make a claim, such as:

  • 100% of your mortgage repayments
  • 125% of your mortgage repayments (so that you can also cover other bills)
  • 50% of your salary

MPPI will usually pay out monthly for up to two years, after an initial, unpaid, ‘exclusion period’ of between 30 and 180 days after you stop working.

What other types of insurance could you consider?

There are several reasons you might decide that MPPI isn’t right for you (for example, if you have additional large monthly costs besides your mortgage).

Here are some alternative options you might consider:

  • Income protection insurance can also cover your monthly costs if you’re unable to work due to illness or injury, and sometimes redundancy
  • Critical illness cover is designed to provide a cash lump sum if you’re diagnosed with specific serious illnesses or injuries
  • Life insurance can help to financially support your family with a lump sum or regular payments if you die

All Rights Reserved. Information contained in this article and on our website does not constitute advice and is provided for information purposes only. Recipients should not act upon it, but should seek professional advice relevant to their own situation.