Mortgage Payment Protection Insurance

Mortgage Payment Protection Insurance (MPPI) covers your mortgage repayments should you suffer from an accident, sickness or unemployment.

• Should a claim arise it will pay out a monthly income that allows you to keep up with your mortgage repayments for up to 12 or 24 months.
• You can cover an additional 25% of the mortgage repayments to help meet other costs, such as bills and everyday expenses.

What Does Mortgage Insurance Cover?

There is flexibility in the type of risk you can protect with MPPI, although naturally the more risk you wish to protect the higher the overall cost. You can opt to protect against the risk of illness or injury as a standalone policy – the same goes for forced redundancy – or you can combine the two.

• Accident & Sickness Insurance
  This will cover your monthly mortgage repayments should you be unable to work due to illness or injury. When considering Accident and Sickness Insurance it is important to check the policy wording to make sure the insurer uses an ‘Own Occupation’ definition.
• Unemployment Insurance
  Unemployment cover will make sure you can meet your monthly mortgage repayments should you be made forcibly redundant through no fault of your own. To claim your benefits, you will need to be registered with the relevant government agency as unemployed and be actively looking for work.

Can We Get Joint Mortgage Insurance?

Although less common there are some Joint MPPI policies which cover each party’s proportion of the mortgage. Should either party be unable to earn an income and meet their proportion of the monthly repayments the policy kicks in.

It is more common however to take out two individuals policies as the cost difference per person is negligible. When working with a couple who have a joint mortgage we often set-up an Accident and Sickness Insurance policy per person.

Do I Need Payment Protection for My Mortgage?

Although it is not compulsory to take out protection when you get a mortgage there are many reasons why you might nonetheless need Mortgage Protection Insurance.

• According to a recent Drewberry survey, more than 1 in 4 people had less than £500 in cash savings in the bank for emergencies. How long would your savings last if you couldn’t work?
• Drewberry’s survey also found that 44.9% of Britons have a mortgage and 1 in 4 people had at least £100,000 left to repay on their home.

A mortgage is a huge financial commitment that takes decades to repay, so it makes sense to protect it in case you can’t work at some point during the mortgage term.

If you had to default on your mortgage through accident, sickness or unemployment, you’d lose everything you’ve worked so hard to build.

Do I Need Mortgage Payment Protection or Income Protection?

This is where it gets a little confusing. Although Mortgage Payment Protection may seem similar to traditional Income Protection the level of cover, underwriting and structure of the policy is very different.

While Mortgage PPI can be a very valuable product to protect your mortgage, there are some areas where this particular insurance product can fall short.

Where MPPI lacks, however, Income Protection Insurance excels and for some people it may be the case that you should consider Income Protection instead of MPPI.

The main benefit of choosing Income Protection over MPPI is that the benefits are tied to your income instead of your mortgage repayments.

You can insure up to 65% of your monthly earnings with Income Protection, which means that your benefits can cover more than your mortgage payments.

Long-Term Protection

The best Income Protection Insurance is long-term, which means it will pay out for as long as you need it to, offering a monthly income right up until retirement if necessary.

Getting ‘Own Occupation’ Cover…

Another downside of Mortgage Protection Insurance is that it tends to use a ‘suited occupation’ definition of incapacity. This means if you are too ill to do your current job, the insurer is entitled to assess whether you can do any other job you’re ‘suited’ to before you can make a claim.

The best Income Protection, on the other hand, uses an ‘own occupation’ definition of incapacity, which means you’re entitled to a payout if you can’t do your own specific job through illness or injury.

Mortgage Payment Protection Exclusions

How Much Does Mortgage Protection Insurance Cost?

The cost of Mortgage Protection Insurance will depend on a variety of factors, including:

• Your age
  The older we are, the more likely we are to need to claim on the accident and sickness element of the policy due to illness, and so the higher premiums will be.
• How much cover you need
  The more you need each month to cover your mortgage, the higher the price of Mortgage Insurance will be.
• Length of cover
  Similar to age, the longer you run a policy for (usually matching the length of your mortgage) the more premiums will cost due to your increased age at the policy’s end.
• Your smoker status
  Smoking has a proven link to a number of serious illnesses and, as such, smokers pay more for their Mortgage Payment Insurance.

In the below table, we’ve laid out the monthly cost of Mortgage Insurance for an individual of three different ages. To come up with these figures (correct as of April 1st, 2019 and representing the cheapest quotes from across the UK market), we’ve assumed:

• They’re non-smokers
• They’re an office worker
• They want £1,000 worth of cover up until the age of 65
• They have a 4 week deferral period
• The benefit will remain level over time.

Mortgage Payment Protection Policy Features

The initial options you are given when taking out your cover are fairly straightforward, but some cover choices you need to make can have a big impact on your premiums and your ability to claim.

Deferred Period

The deferred period – also known as the excess period – is the length of time you need to be out of work before you can claim on your Mortgage Insurance.

The shortest available excess for this type of insurance is 30 days. This means that you will need to be out of work for 30 days before you are eligible for a claim and then wait another 30 days in order to receive your first payment.

Back to Day 1 Cover

Even with back to day one cover, you would wait 30 days before you are eligible for a claim. However, rather than waiting until day 60 before your first benefit payment, you would be paid back for the first 30 days that you were off work on day 31.

Unemployment Exclusion Period

With all Mortgage Insurance plans, there is an initial exclusion period on the Unemployment cover which tends to be up to 120 days.

Should you be made aware of the risk of redundancy or be told you are going to be made redundant during this first 120 days of the policy, you typically can’t claim for unemployment cover.

Compare Best UK Mortgage Payment Protection Insurance

Aegon

Aegon was founded as Scottish Equitable in 1831 in Edinburgh and their main headquarters still remain there today. In 2018 it won the ‘Life Insurer of the Year’ Award at the British Claims Awards.

• 2017 payout rate: 96%
• Maximum cover: 55% of gross earnings
• Guaranteed/Reviewable Premiums
• Own Occupation

AIG

AIG was re founded in 2008 as Aegas Protect and was eventually acquired by insurance giant American International Group Inc. in 2014. In 2018, the company won the ‘Best New Product (Income Protection)’ Award at the Protection Review Awards.

• Maximum cover: Up to 60% of gross earnings
• Guaranteed/Reviewable Premiums
• Own Occupation

Aviva

Aviva first began as Norwich Union in 1797, which merged with CGU PLC in 2000 to become Aviva. Today, it is the largest insurance group in the UK. In 2017 it won the ‘Best Customer Service’ award for the second year running.

• 2017 payout rate: 88.8%
• Maximum cover: 55% of gross earnings
• Guaranteed / Reviewable Premiums
• Own Occupation

The Exeter

With links going back as far as 1888, The Exeter as it is today was founded in 2008 when two friendly societies joined forces: The Exeter Friendly Society and Pioneer Friendly Society. As a mutual friendly society, they operate for the benefit of its members. The Exeter won for three years in a row the ‘Best Income Protection Provider’ Award between 2011 and 2013

• 2017 payout rate: 91%
• Maximum cover: 60% of the first £100,000 of your taxable income and 40% of your income above £100,000
• Guaranteed / Age-banded premiums
• Own Occupation

Legal & General

Legal & General was founded in 1836 in a Chancery Lane coffee shop. In 2018, the company won the ‘Protection Provider of the Year’ Award at the Personal Touch Financial Excellence Awards.

• 2017 payout rate: 95%
• Maximum cover: 60% of gross earnings up to £60,000 and 50% of additional earnings
• Guaranteed Premiums
• Own Occupation / Activities of Daily Living

LV

Liverpool Victoria has won the ‘Best Income Protection Provider’ Award at the Investment Life & Pensions Moneyfacts Awards for 9 years in a row between 2010 and 2018.

• 2017 payout rate: 96%
• Maximum cover: 60% of gross earnings
• Guaranteed/ Reviewable Premiums
• Own Occupation

Royal London

The Royal London mutual society was originally founded in 1861, although originally as a friendly society. Today it is one of the largest mutual insurance providers in the country. In 2018, it received a 5-star rating for its protection service for the fifth year in a row at the Financial Adviser Service Awards.

• 2017 payout rate: 92.1%
• Maximum cover: 65% of gross earnings up to £15,000 per month and 55% of additional earnings
• Guaranteed Premiums
• Own Occupation

Vitality

In 2017, Vitality’s policy received a 5 star Defaqto rating and has done so for the past 8 years running.

• 2017 payout rate: 96%
• Maximum cover: 60% of your earnings capped up to £2,500 per month and 50% of any earnings above
• Guaranteed / Reviewable Premiums
• Own Occupation / Activities of Daily Living / Special Incapacity Definition

Get Expert Mortgage Payment Protection Advice

Why Speak to Us…

We started Drewberry because we were tired of being treated like a number and not getting the service we all deserve when it comes to things as important as protecting our health and our finances. Below are just a few reasons why it makes sense to let us help.

• There is no fee for our service
• We are independent and impartial
  Drewberry isn’t tied to any insurance company, so we can provide completely impartial advice to make sure you get the most appropriate policy based solely on your needs.
• We’ve got bargaining power on our side
  This allows us to negotiate better premiums for you than you going direct yourself.
• You’ll speak to a dedicated expert from start to finish
  You will speak to a named expert with a direct telephone and email. No more automated machines and no more being sent from pillar to post – you’ll have someone to speak to who knows you.
• Benefit from our 5-star service
  We pride ourselves on providing a 5-star service, as can be seen from our 2198 and growing independent client reviews rating us at 4.92 / 5.
• Gain the protection of regulated advice
  You are protected. Where we provide a regulated advice service we are responsible for the policy we set-up for you. Doing it yourself or going direct to an insurer won’t provide this protection, so you won’t benefit from these securities.
• Claims support when you need it the most
  You have support should you need to make a claim. The most important thing when it comes to insurance is that claims are paid and quickly. We are here to support you during the claims process and make sure it’s as smooth and stress free as possible.

If it is all getting a little confusing and you need some guidance then please do not hesitate to get in touch.

Either pop us a call on 02084327333 or email help@drewberry.co.uk.

Tom Conner
Director at Drewberry