Mortgage Protection Insurance can become very important. Your mortgage is likely to be your biggest single monthly commitment, but how would you pay it if you were unable to work?

Mortgage Payment Protection Insurance is designed to meet your mortgage repayments and safe-guard your home if you aren’t able to work because of unemployment, accident or illness.
Why would I need it?

Mortgage Protection Insurance isn’t likely to be a requirement of your mortgage agreement. However, if you aren’t confident that you could meet your mortgage repayments should you became unable to work, having this type of cover in place can be an attractive and reassuring proposition.

If you are unsure about whether you require Mortgage Protection Insurance, try asking yourself a few basic questions, such as:

• Could you still meet your financial commitments if you lost your main source of income?
• Could your partner cover the mortgage if you were unable to?
• If you lost your job would you be able to quickly find a new one?
• Do you have sufficient savings to tide you over?
• If you were made redundant, would the payout be sufficient to cover your outgoings for more than 3 months?
• If you were unable to work, would you be able to cover your mortgage repayments with statutory sick or do you get comprehensive and ongoing sick pay from your insurer?

If the answer is ‘no’ to any of the above questions, or you are self-employed, then you may want to consider the possibility of taking out some form of Mortgage Protection Insurance.
What does it cover?

Mortgage Payment Protection Insurance will cover repayments on both interest–only and repayment mortgages against loss of income through illness, accident or unemployment.

It is possible to reduce your premiums by taking out a policy that only covers you for loss of income due to accident and sickness only. This could be worth considering if you have a secondary income that would be sufficient to support you if you became unemployed.

Likewise it is also possible to take out an MPPI policy that only covers you against unemployment. This could be attractive if your employer has a particularly generous sick pay policy.

The amount of cover you can take out is usually based on a percentage of your gross monthly salary up to a maximum set by the insurer. Policies also differ on the percentage of your mortgage payment they will be willing to cover. By paying an extra premium, it is also sometimes possible to take out extra cover over and above your mortgage repayment, this can be used to cover other expenses such as utility bills if you became unable to.

Insurance mortgage protection policies differ greatly on what they will cover as well as what they won’t. As such it’s important to think about exactly what support you would need from a mortgage payment protection plan if you became unable to work and then find the best priced policy that fits.

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