Mortgage Payment Protection Insurance

MPPI cover provides two key forms of protection: protection against forced unemployment and protection against the risk of being ill or injured.

Mortgage Payment Insurance can be quite flexible in its nature because you can choose either one type of protection or a combination.

Accident and Sickness Cover Only

This type of cover will pay out if you injured or ill severely and can’t work. You will need to provide your insurer with evidence of your condition. Typically, you’re unable to claim for pre-existing conditions.

Unemployment Cover Only

This type of cover will pay out only if you are made redundant and are not at fault for your unemployment.

To claim your benefits, you will need to be registered with the relevant government agency as unemployed and be actively looking for work.

Accident, Sickness & Unemployment Cover

Often, a MPPI plan will combine both types of protection to give you comprehensive cover. With combined cover, you will be able to claim your benefits if you are ill, injured or made unemployed.

How Much Mortgage Payment Protection Covers

While Mortgage Payment Insurance is designed primarily to protect your mortgage, insurers understand that there are additional expenses that you might struggle to cover if you aren’t earning.

Because of this, insurers sometimes give you an option for an additional benefit when picking your level of cover.

The typical maximum level of cover that you can get from an MPPI policy is cover for your mortgage payments plus an additional 25% for other essential expenses, such as utilities or council tax.

How Long Your Cover Lasts

Mortgage Payment Protection Insurance is a short-term payment protection product and as such the maximum benefit period is limited to either 12 or 24 months depending on which you choose when you take out your policy.

When you reach the limit of your set benefit period, your insurer will stop sending you monthly benefits, even if you have yet to return to work.

However, you can claim again in the future after returning to work. Policies can last until your retirement if you continue paying premiums.

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 your 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 around 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.

Many couples that share a home have taken out a joint mortgage and for that reason demand has increase for Joint Mortgage Payment Protection Insurance policies.

When two people are making contributions towards their mortgage, the loss of one partner’s income could make it difficult to meet monthly mortgage payments or put a lot of strain on the one person still earning.

If you take out a Joint Mortgage Payment Protection Insurance policy with your partner, you will have an insurance policy to fall back on if either of you become ill, injured, or unemployed.

When you take out your Joint Mortgage Payment Protection policy, the insurer would cover the cost of your joint mortgage payments in full for a maximum of either 12 or 24 months, just as would be the case if you had a single policy.

If you want to cut the cost of your cover, it is possible to insure each partner for their share of the monthly mortgage payments. So if one partner earns less, you can reduce the amount of monthly benefit for them and potentially save money.

Whether or not this policy structure is available will be dependent on your insurer, so feel free to contact us to learn more about this type of Joint Mortgage Payment Protection.

Sam Barr-Worsfold
Independent Protection Expert at Drewberry

Your MPPI policy is likely to have some standard exclusions on certain medical conditions as general exclusions, which you will need to look out for and be aware of.

While exclusions will differ depending on your insurer, there are some common exclusions that you will find written into the terms of most Mortgage Protection plans:

Common MPPI Unemployment Exclusions

• You were notified and given fair warning about the risk of unemployment during the initial exclusion period
• You’re unemployment following a period of part-time, temporary, or intermittent employment
• You voluntarily became unemployed (with the exception of leaving work to become a carer)
• You were dismissed by your employer because of your own misconduct.

Common MPPI Accident & Sickness Exclusions

• Your injury or illness is related to a pre-existing condition
• Your injury or illness was self-inflicted
• Your absence from work is related to normal pregnancy and childbirth.