Mortgage Payment Protection Insurance
Mortgage payment protection insurance (MPPI) is a type of insurance policy which offers a type of payment protection which covers your mortgage loan repayments if a disaster happens to you such as accidents, sickness and losing your job.
MPPI is very similar to a number of other insurance products classed as income protection insurance. This class also includes unemployment protection insurance (also known as redundancy insurance), loan protection insurance (covers loan repayments), and payment protection insurance (covers credit card payments).
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Why would you take out mortgage payment protection insurance?
When you buy a home, for most people it is the single largest investment in their lives and they have to take out a large loan, or mortgage, in order to buy their property.
You have to commit to making regular and sizeable monthly repayments, normally over a 25-year period, to pay back your mortgage loan. You would normally expect to be able to do so.
Something awful could happen to you and prevent you from earning, stopping you from making your essential monthly mortgage repayments, thus putting your home - and therefore the security of you and your family - at risk.
Without insurance, your only form of income might be Employment and Support Allowance, which at most would give you a little more than £100 per week, in no sense adequate for covering your expenses. This is why you should take out Mortgage Payment Protection Insurance.
In a similar fashion, you take out buildings insurance just in case something awful happens which destroys the fabric of your property and which covers rebuilding it; and you would take out life insurance to cover your mortgage in the event of your premature death, which protects your family and dependants from the threat of repossession.
Mortgage Payment Protection Insurance [MPPI]
You take this out to cover your mortgage and protect your family and dependants from homelessness in the event that you are unable to work, whether because you've been made redundant or you've become too ill.
Frequently Asked Questions
"What's the difference between mortgage payment protection insurance and income protection insurance?"
Mortgage payment protection insurance is a form of income protection insurance and specifically addresses covering monthly mortgage repayments.
"How long does mortgage payment protection last for?"
You can find policies which last between 1 and 75 years but most providers only cover you up to retirement age, and the maximum age insurers generally regard as acceptable as a retirement age is 70.
Once selected the policy will remain in force for the chosen length of time so long as you continue to pay the premiums.
"How long does mortgage payment protection insurance offer cover for?"
Depending on your policy, payouts will continue until you return to work or until the policy expires - which is usually at the end of a fixed period, or when you reach retirement. This is known as the benefit period.
"How much can you claim with mortgage payment protection insurance?"
In a typical scenario, the insurance covers your monthly mortgage repayments for up to 2 years and pays up to £2000 every month or about 65% of your monthly income, whichever is the lower figure. All payments you receive from your insurer are tax-free.
"How much does mortgage payment protection insurance cost?"
This depends on your own individual circumstances. You should always bear in mind that with insurance, the better the cover and the longer it lasts, the higher the premium you can expect to pay for it.
