Mortgage protection (sometimes known as mortgage payment protection insurance – MPPI) could cover your mortgage payments if you become unable to work due to accident, illness or forced unemployment. Contact a mortgage adviser today for details and to arrange a mutually convenient time to discuss the options available to you.
What is Mortgage Protection?
Mortgage Protection is usually a short-term income protection product which will offer cover for 6 to 12 months, but some policies may protect you for up to 24 months. This is because it’s expected that you’ll find alternative employment or recover from illness or injury in this time and have an income again. Therefore you will no longer need Mortgage Protection.
The cost for Mortgage Protection insurance can vary considerably, depending on many circumstances.
What does Mortgage Protection cover?
Depending on what Mortgage Protection you take out, it generally covers your mortgage payments if the following occur;
- You have an accident that was not your fault and you are unable to produce an income because of it.
- You get an illness that leaves you unable to work and unable to produce an income..
- You are forced into unemployment so you cannot earn money. This does not apply if you were forced into unemployment because of wrong behaviour or fraud.
Mortgage protection policies cover payments on your mortgage for a set period of time, usually between 1 and 2 years. Many policies have an exclusion period of around 60 days. During this time you can’t claim for unemployment, however you’re still covered for accident or sickness. There is usually a waiting period of around 60 days (although in some cases it can be less) before any claims are paid. So, even if you have MPPI, you still need enough cash set aside to cover your mortgage repayments for two months.
When Can I Not Claim From Mortgage Protection?
There are a number of instances where Mortgage Protection will not pay out. It won’t pay if you are off work because of a medical condition you knew about when you took out Mortgage Protection, whether diagnosed by a doctor or not. You cannot claim for a medical condition that persists or returns in the first 12 months of the policy.
It will not pay out for pregnancy unless there are medical complications.
Most policies will not cover for stress or back related injuries – two of the most common reason for workers being unable to do their jobs.
It will not pay if you lose your job due you resignation, take voluntary redundancy or are dismissed for misconduct, or if you cannot work as the result of an illegal activity. If you are made redundant involuntarily, you will have to be claiming Job Seekers Allowance to get a payout from Mortgage Protection.
Finally, Mortgage Protection doesn’t pay out if you are made unemployed within the first 60 days of the policy being taken out.
How much does Mortgage Protection cost?
On average Mortgage protection costs £4.66 for every £100 of monthly mortgage repayments covered. For example, mortgage protection insuring a monthly repayment of around £850 would cost around approximately £40 a month. However, there are huge variations in mortgage protection cost – the cheapest policies cost £2.04 per £100 of cover; the most expensive are £7.79. Monthly payments are limited, usually at £1,500 or £2,000 a month or at a percentage of your income. So if you have a very large mortgage, you will need to think about how you will cover any excess.
* The above are only estimates and prices vary. These are only to give you an indication.
Do I Need Mortgage Protection Insurance?
If you or your family would not be able to pay the mortgage if you fell ill and were not able to work then mortgage protection could be for you. To know if you need mortgage protection you need to think about your family income, if your partner would be able to pay the mortgage comfortably without your input of the income, then mortgage protection is not a necessity. On the other hand, if your partner would struggle paying the mortgage or if you do not have enough savings to be able to pay the mortgage while you are unable to work, then mortgage protection is for you.