Mortgage protection insurance
- Cover your mortgage payments if you’re unable to work
- Add an extra 25% to cover your bills
What is mortgage protection insurance?
Mortgage payment protection insurance (MPPI) is a type of income protection. You can claim it if you lose your job through no fault of your own or cannot work because of a serious injury or illness.
It will cover your monthly mortgage repayments, as long as they don’t exceed 65% of your monthly gross salary.
If you need to make a claim, MPPI could pay you a set amount each month.
You might want the policy to just cover the cost of your mortgage repayments. But some providers give you the option to add an extra 25% to cover bills and other expenses too. If you choose this option, providers will typically pay out 125% of your mortgage costs.
Most insurance policies that cover your mortgage will pay out for up to 12 months. In some cases, they will pay for up to 24 months or until you return to work, whichever is sooner.
Do I need mortgage protection insurance?
Mortgage insurance protection might be for you if:
- Being out of work would make it difficult to meet your mortgage repayments
- You’re self-employed and aren’t eligible for sickness or redundancy pay.
Mortgage protection insurance, also known as mortgage coverage insurance, acts as a safeguard if you can no longer afford your monthly repayments. Ultimately, it can save you from defaulting on your mortgage and possibly losing your home.
Alternatively, you could consider general income protection insurance. With this, the pay-outs can be used however you wish if you can’t work because of accident or illness. It doesn’t cover redundancy, though, and tends to be more expensive than MPPI.
How does mortgage protection insurance work?
Mortgage insurance offers cover if you’re unable to work for a reason covered by your policy. The pay-out will depend on the type of mortgage protection cover you choose. You can set how much you’d like your policy to pay out every month.
The maximum monthly benefit you can receive is normally capped. This is usually either:
- A set limit per month, often around £1,500 to £2,000
- A percentage of your gross monthly income, typically around 65-75%.
You’ll usually get whichever is the lesser amount.
If your claim is successful, you’ll need to wait 30 to 180 days for a pay-out. This is known as the ‘deferred period’. The reason for this is to stop people from taking out insurance when they know they’re about to be made redundant.
However, some providers offer ‘back to day one’ cover. This means that at the end of the deferred period, your payments will be backdated to the date you made the claim.
Top tipChoosing to defer payments for longer typically makes your premiums cheaper. But it’s important not to leave yourself too financially stretched during the break in your income. |
What does mortgage protection cover?
Different levels of mortgage payment protection insurance are available, depending on what you want cover for:
- Accident and sickness – this can cover your mortgage repayments if you’re unable to work because of serious illness or injury.
- Unemployment – this could give you an income to cover your mortgage if you’re made redundant. It won’t pay out for accident and sickness.
- Accident, sickness and unemployment – this gives you the most comprehensive cover. It could pay out if you lose your job and if you’re not able to work through serious illness or injury.
Some policies will also cover you if you need to leave work to become a carer for an immediate family member.
MPPI is available to self-employed and contract workers as well as employed people, although there may be some additional exclusions to watch out for.
What doesn’t mortgage protection insurance cover?
Mortgage payment protection insurance typically won’t cover:
- Voluntary redundancy
- Prior knowledge of the risk of redundancy
- Being made redundant within the specified exclusion period
- Refusing to accept an alternative role from your employer
- Getting sacked from your job
- Pre-existing medical conditions and chronic conditions
- Pregnancy and childbirth (unless there’s a medical complication)
- Stress or back-related injuries and illnesses (unless strict criteria are met)
- Self-inflicted injuries
- Elective medical treatments or surgery
- Inability to work due to alcohol or drug abuse.
If you’re self-employed, you may be able to find cover for unemployment but it’s likely that you’ll have to meet strict criteria to claim. That’s because you’re responsible for finding your own work.
Always read the policy details carefully to check what’s covered and what’s not before you take out mortgage protection.
Alternatives to mortgage protection insurance
There are several alternatives to mortgage protection insurance:
Mortgage life insurance
Pays out a lump sum to cover your mortgage if you die within the term of the policy. Mortgage life insurance is often sold as ‘decreasing term insurance’. This means that the pay-out reduces as your mortgage debt reduces.
Critical illness cover
Critical illness cover could pay out if you’re diagnosed with one of the serious illnesses the policy covers. The list of illnesses can vary among providers.
Income protection insurance
Designed to pay out a replacement income if you can’t work, usually due to illness or injury. There are different income protection insurance options available, offering short and long-term cover.
Rather than just protecting your mortgage payments, it could cover bills and other living expenses too.
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Did you know? Sales of new individual income protection policies hit 247,000 in 2023, a 16% increase on 2022, according to figures from the Association of British Insurers (ABI). |
How much is mortgage protection insurance?
Mortgage protection insurance costs are based on your personal circumstances, including your age, job, salary and the size of your mortgage repayments. If you’re a manual labourer, for example, you’re more at risk of serious injury than someone with a desk-based job. So, your premiums are likely to be higher.
The price of your premiums will also vary depending on the type of policy you take out and the level of cover you choose. For example, it makes sense that you’ll pay more if you choose to cover 125% rather than 100% of your mortgage payments to account for bills and other expenses.
The cost is also influenced by how soon you want to be covered after making a claim and how long you want the cover to last.
How can I lower my mortgage protection insurance costs?
There are a few things you can do to reduce the amount you pay for mortgage protection cover.
Check your employer’s sick pay
If you’re unable to work due to serious illness or injury, your employer may have a company scheme that entitles you to more than the statutory sick pay. This may cover your mortgage payments for a short period. This could mean you can delay your payments by choosing a longer deferred period, which could reduce your premium.
Factor in your savings
If you have a substantial amount saved up, you might be able to cover your mortgage payments for a while. If you don’t need cover straight away and can choose a longer waiting period, your mortgage protection insurance premiums are likely to be lower.
If you have life insurance, you may have extended cover for mortgage protection
If you have life insurance, you might already have critical illness cover included. This could help you pay off your mortgage if you’re diagnosed with a serious illness listed in the policy.
Compare mortgage protection quotes to find the right deal for you
The amount you’ll pay for mortgage cover depends on various factors. It’s a good idea to compare different providers and types of cover. This could help you find the best mortgage protection insurance for your situation.
What do I need to get a quote?
To get a mortgage protection insurance quote, you’ll need to give:
- Personal details, such as your name, address and date of birth
- Annual income
- Monthly mortgage payments
- Maximum amount of time you can afford to wait before receiving the benefit
- Employment details.
What our expert says...
“You never know what life is going to throw at you. Mortgage protection insurance can be a great safety net should you find yourself in a difficult situation. Make sure you find the right type of insurance for you and avoid having lots of policies that may overlap.”
- Tim Knighton, Life, health and income protection insurance expert
Mortgage protection insurance FAQs
Does everyone with a mortgage need mortgage protection insurance?
Not everyone with a mortgage in the UK needs mortgage protection insurance. You might not need it if:
- You’re likely to get a large redundancy pay-out
- Your employer’s sick pay is very generous
- You’re already covered by a health insurance policy.
You might not need mortgage protection cover if you’re eligible for government benefits that will help you pay your mortgage.
If you’re on a qualifying benefit, you may be able to apply for a Support for Mortgage Interest (SMI) loan, to cover the interest on your mortgage. You’ll need to have been claiming benefits for at least 13 weeks before the first SMI payment is made.
How can I compare mortgage protection insurance?
You can compare mortgage protection deals right here with our easy comparison service. Just fill in a few details about yourself and the type of cover you’re interested in:
You can select different tabs to see the various kinds of cover and how much they would cost.
What’s the difference between life insurance and mortgage protection?
Life insurance will pay out when you die. In some cases, it will also pay out if you’re diagnosed with a terminal illness covered by the policy.
Mortgage protection insurance is a type of income protection that will cover your mortgage payments if you’re out of work due to accident, sickness or unemployment.
Is mortgage protection insurance the same as payment protection insurance (PPI)?
No, mortgage payment protection insurance (MPPI) and payment protection insurance (PPI) are not the same thing. They’re both types of insurance that cover a single specific debt. But that’s where the similarities end.
Mortgage protection insurance is specific to your mortgage, and pay-outs will be paid directly to you. PPI covers unsecured finance and pay-outs are paid to the lender rather than you.
Will being a smoker affect my mortgage protection quote?
You’re likely to pay higher premiums if you’re a smoker or vaper. This is because you’re deemed a higher risk. In other words, you’re more likely to fall ill and make a claim.
Can I talk to someone about MPPI insurance?
Yes, the friendly advisors at our partners Howden Life & Health are happy to help. Call them on 0808 141 1336. Lines are open Monday to Thursday, 9am-8pm; Friday, 9am-5pm; Saturday, 10am-2pm.
