Accident and sickness
This will cover your mortgage repayments should you fall sick or have an accident which means you are unable to work. It will not pay out if you lose your job.
If you lose your job or are unable to work through accident or sickness, mortgage payment protection insurance will cover the cost of your mortgage repayments. This is usually for 12 months or whenever you can return to work – whichever happens first.
You can apply for MPPI if you are employed, self-employed or a contract worker - although always watch for exclusions.
You can choose how much you want your policy to pay out every month – you may decide to build in a buffer over and above your mortgage repayments to cover bills and other expenses. However, providers usually set monthly upper limits of between £1,500 and £2,000.
If your claim is successful, you will need to wait between 30 and 180 days for it to pay out, while short-term policies only provide 12 months' benefit. In this case, make sure you consider other options before taking MPPI, such as using your savings to tide you over until you can start working again.
Your mortgage is likely to be one of if not the biggest expenditure of your household, and it’s important to keep up with all your repayments or you risk losing your home. However accidents do happen and sometimes life doesn’t always go to plan – which is where a mortgage payment protection policy can step in to help.
You won’t always be able to claim immediately upon taking out mortgage payment protection insurance – most have a waiting period of one or two months. When you compare with MoneySuperMarket and ActiveQuote you’ll be able find wait times from:
Zero days – meaning you can claim immediately
The shorter the wait time, the more expensive your premiums will be.
Your job may affect your policy as some occupations carry higher risks than others, meaning you’ll be more likely to get ill or injured – for example if you work at a construction site you might face higher premiums than a computer programmer or secretary.
If you’re self-employed you might also have to pay more for protection – and if you’re a contractor you should double check you aren’t excluded from cover.
Some insurers don’t offer cover for people with pre-existing conditions, and the ones that do generally have certain criteria in place. For example, you might not be able to claim for mortgage repayments if your condition flares up within a certain period after taking your policy out.
You may also need to provide evidence such as a doctor’s note if you take time off for certain conditions – you should check carefully for any exclusions before taking a policy out.
While needing time off work to take care of your mental health is common and recommended, you may find it more difficult to make a claim on your policy. You may have to show evidence that your mental health is making you unable to work.
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’s 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.
A mortgage life insurance policy pays out to cover your mortgage payments when you die, while a mortgage payment protection insurance policy will pay out if you can’t work due to illness or injury.
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