Why Joint Mortgage Insurance?
Joint Mortgage protection covers your mortgage repayments should either partner suffer an accident, sickness or unemployment.
Designed to protect your monthly mortgage repayments and associated bills such as council tax and utilities.
41% of employees have been made redundant or suffered long term ill health during their working life. Met Life 2012
Speak to our expert advisers or get an instant quote online comparing the UK’s leading insurers.
What does Mortgage Payment Protection cover?
Accident & Sickness
With mortgage payment insurance you can cover the risk of having to take time off work due to illness or injury, thus ensuring you can keep up with your repayments.
The vast majority of MPPI plans also have the option to cover yourself against the risk of forced redundancy. Some plans can just cover unemployment only.
Important! As most MPPI plans can only payout for 12 months it makes sense to consider adding critical illness cover to your mortgage life insurance or taking out a long-term policy to cover the risk of serious illness or injury.
How does joint Mortgage Protection work?
You or your partner cease working due to Accident, Sickness or Unemployment.
You make a claim with the insurer (including your GP note / redundancy letter).
The insurer starts paying out a monthly benefit after your initial deferred period.
The insurance plan will continue to pay the couple a monthly benefit either until the ill/unemployed partner returns to work or they reach the maximum payout length on the policy.
Do we need joint Mortgage Protection?
When deciding if MPPI is worthwhile it makes sense to know the facts about what risks we all face:
The Incapacity Risk:
1 in 10 people have been unable to work due to illness or injury for over 6 months (The Guardian / Unum Survey, 2011).
The Unemployment Risk:
1 in 5 people have been made redundant at some point during their working life (Met Life, 2012).
As a couple how long would you be able to keep up with your mortgage payments if either of you lost your income?
Your Key Options
Choose your level of cover
It is usually possible to cover up to 125% of your monthly mortgage payments, provided this is within 65% of your and your partners gross (pre-tax) income.
Your deferred period
The length of time you would need to be off work before the policy starts paying out. The shortest deferred period is 30 days and the longest is 12 months.
Your payout length
Most plans can payout for either 12 or 24 months but some general income protection plans can payout for the entire length of your mortgage.
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Why consider joint MPPI?
It is common today for home loans to be taken out jointly between two partners and as a result there is a large demand for joint policies to cover that potential liability. It is usually the case that both partners make significant contributions towards the monthly loan repayments. If the income from one partner were to cease it will usually create a large financial burden.
If one partner does not have the income to pay their share the remainder of the monthly mortgage loan payments will have to be paid solely by the other partner or supplemented out of savings. Naturally, in many cases the loss of one partners income leads to the development of mortgage arrears and possibly home repossession.
What can the policies cover?
Fortunately, the insurance market in the UK is well developed and able to take this financial risk off your hands. There are four main causes for loss of earnings that can be protected, listed below.
Short-term illness or injury:
You suffer an illness or injury that prevents you from working and therefore, earning for between one month and 24 months;
You get made redundant from your place of work and are unable to find another job for between one month and 24 months;
Long-term illness or injury:
You suffer a serious illness or injury and are unable to work and therefore, to earn a living for an extended period of time, possibly never being able to work again;
Death or terminal illness:
You pass away or suffer a terminal illness and therefore, leave your partner of pay off the joint mortgage loan on their own.
Joint mortgage payment protection
Mortgage payment protection insurance (MPPI) can cover both short-term illness or injury and unemployment. This type of policy will pay out a monthly benefit to cover the full amount of monthly loan payments and an extra 25% for associated home costs, such as council tax and utility bills (if desired).
Insuring your monthly mortgage repayments
The maximum that can be insured is the lesser of £2,500 per month or 65% of gross monthly earnings. The maximum period for which the policy will pay out is either 12 months or 24 months, whichever you choose at the start of the plan.
Thus, if either you or your partner were to suffer incapacity or unemployment (redundancy) the joint mortgage payment protection policy would pay for the total monthly home loan amount due. However, it is possible to structure the joint MPPI plan so that it pays out a proportion of the monthly loan repayment that is equivalent to that particular partners proportion of total partner income (please contact us for this structure of cover).
For example, if both partners have equal income then it can be structured so that the insurance policy would pay out 50% of the loan amount each month if a claim needs to be made, which would make the monthly premiums charged cheaper.
Joint mortgage life insurance
Another form of joint mortgage protection is mortgage life insurance cover. This type of policy can provide home loan and therefore partner protection from the death of one partner (terminal illness is also covered as standard). The policy would pay out a tax-free lump sum directly to the remaining partner.
Provided that the sum insured is set equal to the amount of loan outstanding at the start of the policy, the payout from the life cover would enable the surviving partner to pay off the home loan in full. After the policy has paid out it would terminate (the policy pays out upon first death).
Level or decreasing cover?
If you have a capital (principal) repayment loan then decreasing term mortgage life insurance would be most appropriate as the level of cover declines along with the amount outstanding on the loan. For an interest-only loan level mortgage term life insurance would be most appropriate as the amount of cover remains fixed over the course of the mortgage loan term.
Including critical Illness cover
To cover long-term illness or injury critical illness cover can be added to the life policy. This type of cover will pay out a tax-free lump sum if one of the policyholders suffer a critical illness specified in the policy. Leading critical illness policies cover over 30 conditions, including cancer, heart attack and stroke.
With a joint mortgage life insurance with critical illness policy, the cover will terminate upon the first event of either critical illness or death / terminal illness for either partner (in other words the policy will only pay out once). Thus, with this joint policy combination the loan can be repaid in full if either partner suffers a critical illness or death / terminal illness.
A quick protection tip...
One of the issues with joint mortgage protection life insurance is that the policy ends upon first death leaving the living partner uninsured at an older age. Although the home loan will have been repaid, if additional cover is required for family protection reasons it will be far more expensive to gain this cover at an older age (as age is one of the largest life insurance quote factors).
The tip is to compare the combined monthly premiums of two separate policies relative to the joint plan. It is often the case that you can gain double the cover (with two separate policies) for about 10% more each month. Thus, for a small proportion extra per month you could gain both mortgage insurance cover and family protection cover.
Do I need advice?
If you require any mortgage protection advice on your policy choices or simply want to compare joint mortgage protection quotes please feel free to contact us on 0208 432 7333 or email firstname.lastname@example.org.
We are experts in the home loan insurance market and will be able to provide a guiding hand if desired. Alternatively you can use the Quick Quote box at the top of the page to submit your details for a comparison of joint mortgage protection quotes from the UK’s leading insurers.
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