Mortgage 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 to make sure you aren't left in trouble by not having mortgage payment protection insurance.
What does it cover?
Mortgage 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.
How long will it take to pay out?
It's unlikely that your Mortgage Protection Insurance policy will start paying out the day that unemployment, accident or illness stops you from working.
How long you have to wait will depend on a number of different factors and timescales including:
The initial exclusion period: This is the amount of time the policy will need to be in effect before you can make a claim; it can vary from 60 to 180 days. This usually only applies to unemployment claims
The excess/wait period: This is the number of days that you're able to support yourself. The longer you can wait before you start receiving payments the cheaper your cover will normally be
First payment: Some policies will require you to be off or out of work for a full month after your excess/wait period has ended
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. Use our Mortgage Payment Insurance Advance Search for a simple way to do this.
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