Mortgage protection insurance (MPI) is a type of income protection insurance specifically designed to cover your mortgage payments in the event of certain life circumstances such as death, critical illness, or involuntary unemployment. In the UK, MPI provides homeowners with the peace of mind that their home is protected even if they face unexpected challenges.
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Mortgage protection insurance, also known as mortgage life insurance or mortgage payment protection insurance (MPPI), is a policy that helps ensure your mortgage payments are covered in case you cannot make them for specific reasons. This can include loss of income due to redundancy, illness, or death.
Mortgage protection life insurance might be the right option for you if being out of work would make it difficult to meet your mortgage repayments or if you’re self-employed and not eligible for sickness or redundancy pay.
Mortgage life insurance, or mortgage coverage insurance, is a safeguard if you can no longer afford your monthly repayments. It can save you from defaulting on your mortgage and possibly losing your home. Alternatively, you could consider general income protection insurance, which offers flexibility in payouts for accidents or illnesses but does not cover redundancy and is usually more expensive than MPPI.
Term Plans
Mortgage protection offers cover if you’re unable to work for a reason covered by your policy. The payout depends on the type of mortgage protection cover you choose and how much you’d like your policy to pay out each month. You can cover just the cost of your mortgage repayments or add an extra 25% for bills and other expenses. The maximum monthly benefit is usually capped at a set monthly limit (often around £2,000-£3,000) or a percentage of your gross monthly income (typically 65-75%). If your claim is successful, you’ll have to wait 30-180 days for a pay-out, known as the ‘deferred period,’ though some providers offer ‘back to day one’ cover, which backdates payments to the date of the claim.
You can opt for any of the following mortgage life insurance cover as per your specifc needs:
Accident and Sickness: This plan will cover your mortgage repayments if you cannot work anymore due to a critical illness or a serious injury.
Unemployment: If you cannot pay your mortgage due to unemployment or a job loss, the plan will pay your mortgage payments.
Accident, Sickness, and Unemployment: This will cover you if you cannot repay your mortgage due to sickness, accident, or unemployment.
Mortgage protection life insurance is also available for self-employed, contract workers, and salaried individuals. However, some T&Cs may apply.
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Exclusions in mortgage protection insurance typically include:
Voluntary job loss or redundancy
Prior knowledge of potential redundancy
Getting fired from your job
Pre-existing medical conditions
Certain stress or back-related issues, unless they meet specific criteria
Self-inflicted injuries
Unemployment claims for self-employed individuals
You should review the policy terms carefully to understand coverage and exclusions before buying a mortgage protection life insurance.
The cost of mortgage payment protection insurance (MPPI) depends on several factors, including:
Your Salary or Annual Income: Individuals with higher incomes may have to pay higher premiums.
The Size of Your Mortgage Repayments: If your mortgage repayment amount is large, it can increase the cost.
The Type of Policy You Take Out: Different coverage levels and options affect the premium.
How Soon You Want to Be Covered: Mortgage protection life insurance with shorter waiting periods before coverage starts may be more expensive.
To get a mortgage protection life insurance quote, you’ll need to provide the following details:
Personal Information: Your name, address, and date of birth
Annual Income: Your annual earnings
Monthly Mortgage Payments: The amount you pay for your mortgage each month
Waiting Period: The maximum amount of time you can afford to wait before receiving the benefit
Employment Details: Information about your job and employment status.
The following factors can affect your mortgage life insurance premiums:
Employer’s Sick Pay: If your employer offers a generous sick pay scheme, you may be able to opt for a longer deferred period before benefits start, reducing your premium.
Savings: Substantial savings can temporarily cover mortgage payments, enable you to choose a longer waiting period, and lower your insurance cost.
Existing Life Insurance: If your life insurance includes critical illness coverage, it might already provide some mortgage protection, potentially reducing the need for additional coverage.
Comparing Quotes: Prices vary among providers, so comparing quotes from different insurers can help you find the most cost-effective option.
Assess Your Needs:
Determine what type of coverage you need based on your financial situation, health, and employment stability. Consider whether you need life insurance, critical illness coverage, or income protection.
Compare Policies:
Shop around and compare different policies from various insurers. Look at the coverage options, exclusions, premiums, and the insurer’s reputation.
Read the Fine Print:
Ensure you understand the policy's terms and conditions, including what is covered, any exclusions, and the claims process.
Seek Professional Advice:
Consult with a financial advisor or insurance broker to help you navigate the options and find the policy for your needs.
Review Your Policy Regularly:
As your life circumstances change, review and update your policy to ensure it continues to meet your needs.
Mortgage protection insurance is a crucial safety net for homeowners in the UK, providing financial security and peace of mind. By understanding the different types of MPI and carefully selecting the right policy, you can protect your home and ensure that you and your family are safeguarded against unexpected financial challenges. Whether it's through mortgage life insurance, critical illness cover, or income protection, MPI can be an integral part of a comprehensive financial plan.
†Policybazaar does not endorse, rate or recommend any particular insurer or insurance product offered by any insurer. This list of plans listed here comprise of insurance products offered by all the insurance partners of Policybazaar. For a complete list of insurers in India refer to the Insurance Regulatory and Development Authority of India website, www.irdai.gov.in
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