An introduction to mortgage payment protection insurance
Mortgage Payment Protection Insurance (MPPI) is designed to cover the cost of your mortgage payments in the event that an accident, sickness or unemployment stops you from working.
Most MPPI policies will only pay out for a maximum of a year, so if you do have sufficient savings in place to tide your over for this length of time, then you may not require cover.
Check how much your employer is likely to pay you in the event that you get made redundant. If you have worked at your company for several years, the chances are you may get a decent payout, which would mean you might be paying for the unemployment element of your mortgage protection policy unnecessarily. It is also worth noting that although statutory sick pay doesn't usually affect short term IP, anything you receive over & above statutory (from your employer for example) can affect the benefit payable under the policy. If this is the case, you may be better off going for accident and sickness MPPI cover only. State benefits don't usually affect this unless they take you over the maximum claim limits, but this is worth checking before taking out a policy.
As a general rule, mortgage protection policies will start paying out either 31 days or 60 days after you are unable to work. However, many policies are 'back to day one' plans. This means that the benefit you receive is backdated to the date you were first out of work.
Monthly payments are capped, usually at £1,500 or £2,000 a month or at a percentage of your income. So if you have a very large mortgage, you will need to think about how you will cover any surplus.
Remember that policies won't usually allow claims related to unemployment within the first three or six months so make sure you have savings in place for this period.
Of course, if you would like to read more about MPPI, our mortgage protection insurance guide will help you understand the product better.