Mortgage Payment Protection
If you found yourself unable to work due to an illness, injury or redundancy, chances are you’d struggle to make your monthly mortgage payments. If you have mortgage payment protection in place, you won’t lose the roof over your head if the worst happened.
Mortgage Payment Protection Insurance (MPPI) is a policy which covers the cost of your mortgage payments if you’re unable to work due to illness, injury or redundancy.
MPPI is not a legal requirement for homeowners, but if you do have a mortgage, it may be worth considering. It can be reassuring to know that your home and your family’s way of life would be protected if you were unable to work.
Do I need cover?
Mortgage payment protection policies usually pay out for a maximum of 12 months, after which you’d be responsible for payments again. If you have enough savings to last 12 months, it may be that you don’t require this type of insurance. However, it’s worth asking yourself whether you’d want to use up all your savings in this way.
If you know (or believe) you are going to be made redundant in the near future, and you take out mortgage protection cover, your policy is unlikely to pay out.
However, if you want to cover yourself against the possibility of being made redundant at some point in the future, then it’s definitely worth considering this kind of policy.
Before making a decision, check how much you’d get paid by your employer if you were made redundant. Depending on your length of service, your payout could be enough to tide you over until you find a new position. If this is the case, you may not need to protect yourself against unemployment, although you may still want to consider covering yourself for accidents and sickness.
How does it work?
Most mortgage protection policies begin paying out either 1 or 2 months after you first become unable to work, so you may need to make at least one mortgage payment yourself. However, once they kick in, most policies do backdate your payments to the date you stopped working.
How much would I get?
Caps to your monthly payments will usually apply. The caps vary between providers, but many don’t pay out more than £1500 – £2000 a month, while others will pay you a percentage of your income. If your mortgage payments are higher than your policy’s cap, you’ll be responsible for covering the remaining amount.
All policies have certain things that they won’t pay out for, which are known as exclusions. Check the terms and conditions carefully before signing on the dotted line, to avoid any nasty surprises in the event that you need to claim.
If you’re a homeowner with a mortgage and you don’t have savings in the bank, a mortgage payment protection policy could be a lifeline if the worst did happen. But when it comes to deciding on a policy it can be hard to know where to start. Be sure you do your homework, take specialist advice and shop around for the best deal.