You’ve worked hard to buy your home and it’s more than likely your biggest asset. It makes sense to financially protect it in case of an unexpected issue. So have you thought ahead as to how you’ll keep up with your mortgage repayments if you lose your job, have an accident or suffer from a serious illness? Mortgage payment protection insurance covers you for these eventualities so you can rest assured that your home is protected.
At Trinity Finance, we’re here to help you safeguard your home with the right financial protection in place. Our mortgage and protection brokers are available to discuss the different types of mortgage payment protection insurance you can choose from and the level of cover you can expect. In this guide, we’ll explain how this insurance works, what is and isn’t covered, how to benefit from lower premiums and the alternative forms of financial protection to consider.
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What is mortgage payment protection insurance?
Mortgage payment protection insurance (MPPI) enables you to keep making your mortgage repayments when you’re unable to work. This could be due to involuntary redundancy, an accident or a serious illness. As your mortgage is likely to be your biggest expense each month, this insurance gives you peace of mind that it’s covered. You don’t need to worry about losing your home and can concentrate on recovering from your illness or injury or finding a new job.
How does mortgage payment protection insurance work?
With this type of mortgage payment insurance, you receive a set monthly amount in the event that you’re unable to work. Policies usually provide financial cover for up to a year but some cover you for up to 2 years.
The payouts from your MPPI
You can opt for your monthly mortgage repayments to be covered in full by your mortgage payment protection insurance policy. This is provided that the repayments aren’t in excess of the insurer’s maximum monthly limit. This limit may be a specific amount or a percentage of your annual income, such as 65%. If you prefer, another option is to cover your bills and other expenses as well as your mortgage repayments. Your payouts in this instance will be for 125% of your mortgage repayment costs.
Claiming on your MPPI
There’s an initial exclusion period for making a claim after your policy has begun. This tends to be 30 to 60 days. When unemployment cover is included in your policy, however, this period is usually longer, such as 120 days.
There’s also a waiting period from the time you’re unable to work until the payouts begin. This deferred period on your mortgage payment protection insurance plan is pre-agreed with your insurer. It usually ranges between 30 and 180 days. The longer you agree for the deferred period to be, the cheaper your premiums will be. You can also opt for ‘back-to-day-one’ cover. This backdates your payment to the date you had to stop working but is a more expensive option.
Types of mortgage payment protection insurance
There are three types of MPPI to choose from: accident and sickness, unemployment only and accident, sickness and unemployment. The type of cover that’s best for you depends on your situation.
- Accident and sickness: This provides cover if you become ill or have a serious injury and cannot work as a result.
- Unemployment: If you’re made redundant, this covers your mortgage repayments.
- Accident, sickness and unemployment: As a combination of the other types of MPPI, this provides cover if you lose your job through redundancy or cannot work due to an illness or injury.
What exclusions are there with mortgage payment protection insurance?
Each insurer is different so it’s essential to check your policy carefully to note any exclusions. Generally, exclusions include:
- Having a pre-existing condition
- A self-inflicted injury or illness
- A stress-related injury or illness
- Voluntary redundancy
- Unemployment due to misconduct
- Being aware of the possibility of unemployment during the exclusion period
Although many insurers won’t cover you if you have a pre-existing medical condition, some will but with strict criteria. For example, you may not be able to claim if your condition recurs within a certain time frame after taking out your policy.
At Trinity Finance, our mortgage and protection brokers are ready to help you financially protect your home. Located throughout Kent, London and Edinburgh, they can discuss the different cover types with you to help you choose the best one for your situation. If you have a pre-existing condition, they will strive to find an insurer that includes this in your MPPI policy. They will also advise you of the alternative options available to safeguard your mortgage and other expenses. To benefit from a financial safety net in the event that you’re unable to work, speak with one of our experts on 01322 907 000. If you prefer, send us an email at firstname.lastname@example.org or an enquiry via our contact form and we’ll reply to you with further information relating to our mortgage protection products.
How much does mortgage payment protection insurance cost?
The amount you pay for your mortgage payment protection insurance varies between providers and depends on different factors. These include your age, the amount you earn, how much your mortgage repayments cost, the type of policy and level of cover you opt for, how quickly you wish the payouts to start in the event of a claim and what your occupation is.
Benefit from cheaper premiums
There are some ways to lower your premiums, which we’ve detailed below.
- Check whether you’re entitled to sick pay via your employer: You may be able to receive sick pay if your employer operates a sick pay scheme. This is separate from Statutory Sick Pay and may be suitable for covering your mortgage repayments. If this is the case, the deferred period can be longer, which helps to keep your premiums lower.
- Ensure that you’re not covered for more than you need to be: You may already have some cover in place through an alternative policy. If so, you may not need the highest level of cover available with MPPI. This also applies if you have savings that you can use instead of opting for the most expensive level of cover. Only being covered for what you need ensures you benefit from cheaper premiums.
- Extend the deferred period: The longer you wait to receive payouts after you’re unable to work, the lower the premiums will be. If you have savings, consider whether they’re sufficient to tide you over for a while.
- Review your policy each year: Circumstances change so it’s best to review your policy to check whether any modifications are needed. You may be able to lower the level of cover you have and benefit from cheaper premiums.
Do you need mortgage payment protection insurance?
Your mortgage repayments are a huge part of your monthly expenses. If you were to lose your regular income due to an illness, injury or being made redundant, would you be able to cover the repayments each month? If not, you risk losing your home and this is when mortgage payment protection insurance is needed. It’s not compulsory to take out this insurance but things do go wrong and you never know when you might need help with this financial backup.
If you’re self-employed, you don’t benefit from redundancy or sick pay and, therefore, it’s a good idea to have MPPI in place. This ensures you can continue repaying your mortgage until you can continue working again.
Alternatives to mortgage payment protection insurance
There are other forms of financial protection available and it’s recommended to seek advice before deciding which one is right for you. This ultimately depends on your situation and needs, and our mortgage and protection consultants can discuss each of them with you to help you make the right decision.
Life insurance pays out a lump sum to your loved ones if you die within the policy term. It can be used to pay off your mortgage as well as to help pay bills and other living expenses.
Critical illness cover
With critical illness cover, you receive a lump sum in the event that you’re diagnosed with a serious illness during the policy term. This only covers you for the specific illnesses detailed in your policy, such as a heart attack, stroke, multiple sclerosis and some types of cancer.
Income protection insurance provides you with monthly payments when you’re unable to work because of an illness or injury. The payments are a proportion of your salary and you can opt for long-term cover until you either return to work, the policy ends, you retire or you pass away.
Ensure your mortgage is covered with mortgage payment protection insurance
At Trinity Finance, we not only specialise in finding a competitive mortgage that is tailored to your needs but also in safeguarding your mortgage with the correct financial protection. Our mortgage and protection brokers – located throughout Kent, London and Edinburgh – compare mortgage payment protection insurance policies provided by different insurers to ensure you have adequate cover in place if needed.
Our expert consultants also provide impartial advice on alternative protection insurance for your mortgage payments to help you make the right choice. For peace of mind that your mortgage repayments are covered if you’re unable to work as a result of redundancy, illness or injury, give us a call on 01322 907 000. If it’s out of office hours, send an email to us at email@example.com or an enquiry via our contact form. One of our protection specialists will reply to you with further details about the best mortgage payment protection insurance available.
Yes, you can take out a joint mortgage payment protection insurance policy. However, only the proportion of the cover amount relating to the person who is unable to work is paid out.
Despite the similar names, these types of insurance are different except for both covering a specific debt. Payouts for an MPPI claim are made to you and cover your mortgage repayments. Payouts for PPI, on the other hand, are made to the lender to cover unsecured finance.
You can benefit from MPPI cover if you’re self-employed although you may have to pay slightly higher premiums. As a contractor, you may find it harder to be approved for cover but our mortgage and protection brokers can search for a specialist policy as well as alternative options that may be better suited to your situation.
It’s likely that you’ll pay more for your MPPI if you smoke. Insurers consider you to be a higher risk because smoking is linked to numerous illnesses and, therefore, you’re more likely to claim on your policy.
Although having to take time off work to look after your mental health is necessary, it’s unlikely you’ll be able to claim for this on your MPPI policy. You may need to give your insurer evidence that you’re unable to work because of your mental health.
The type of job you do may affect your MPPI policy. This is because of the level of risk involved. An office job, for example, carries significantly less risk than working on a construction site. For the latter occupation, there’s more risk of getting injured while working and your premiums are going to be higher to reflect this.