Mortgage Protection Insurance

What is a Mortgage Protection Insurance Policy ?

Mortgage protection insurance is avavilable in two different types, mortgage payment protection and mortgage income protection insurance.

Mortgage Payment Protection Insurance

Mortgage protection insurance is the most common type of insurance to cover your mortgage payments and other related costs in the event of you losing your regular monthly income for a variety of reasons.

Whilst having mortgage protection insurance is not usually a mandatory requirement when you take out a mortgage, can you honestly say that you are confident of you or your family being able to meet your mortgage repayments in the event of any unforeseen circumstances which life may throw at you?

Any number of things could put you in this situation, for example:

You are made redundant
You are unable to work due to sickness

It is an unfortunate fact that any of these things could happen to any of us at any time. Quite simply, by taking out mortgage protection insurance you will be protecting yourself and your family against the risk of losing your home.

Mortgage Income Protection Insurance

If you do not require redundancy cover but would like to protect your mortgage for a longer period of time then it is worth considering income protection insurance. This type of mortgage protection insurance will typically provide cover for a longer term, usually until the end of your mortgage, to take you up to retirement age or until you are able to return to work.

For more information on this type of mortgage protection insurance please refer to the Income Protection Insurance section of our website.

Things to Know About Mortgage Protection Insurance

This type of mortgage protection insurance will typically pay out a regular monthly benefit of up to 125% of your mortgage repayments and household bills.

Your mortgage protection insurance will be a short term contract which you will usually be required to renew on an annual basis so your monthly payments are reviewed each year

Normally mortgage protection insurance policies will typically only pay the benefit amount for a limited period, usually either 12 or 24 months or sooner should you be able to return to work. At which point your policy ceases.

Most mortgage protection insurance policies will typically begin to pay out between 30 and 90 days after the date from when you are unable to work, this is known as the deferment period. It is however important to remember that a lot of policies offer ‘back to day one' which means they will backdate your benefit so you will still be paid out for the initial period.

Are there any options I can have?

You choose the amount of monthly benefit you would need to receive from your mortgage protection insurance policy; this is typically based on your monthly mortgage payments and associated costs for example, buildings & contents insurance and critical illness insurance etc. The overall amount of monthly benefit that you can have however must not exceed 75% of your gross income.

The deferred period of your mortgage protection insurance can be decided by you - this is the length of time you are required to be off work before your benefit will be payable. Typically, the longer the deferred period, the lower the monthly premiums. It is worth remembering however that the price difference is usually minimal so it may not be beneficial. Some policies with a longer deferment period are also not payable back to day one.