What is a Mortgage Repayment Protection Insurance Policy & how does it work?

A mortgage protection policy is a way for you to continue maintaining your mortgage repayments even in the event of involuntary redundancy, or inability to work due to accident and or sickness. Should you fall victim to unforeseen unemployment or incapacity, mortgage payment protection insurance

(to give it its full title) will pay a tax free monthly sum that can be used to meet your mortgage and other associated costs such as home and life insurance, utility bills etc.

MPPI insurance

Just to confuse the issue, mortgage protection insurance may be known by many other names such as ASU insurance (which stands for accident, sickness and unemployment insurance); payment protection insurance (PPI); mortgage cover; MPPI (which is the acronym for the already mentioned mortgage payment protection insurance); and redundancy and sickness insurance. The main thing to remember is that they all do the same thing - provide an income when you are without yours.

How does it work?

Should you lose your income due to one of the covered events, the mortgage protection policy will kick in after a pre-agreed waiting period (normally 30 - 90 days after unemployment or incapacity begins) and provide a monthly cash amount that is tax free that can be used to help maintain your monthly mortgage repayments.

Every provider has their limits to how much they will pay out, but typically, you can expect to cover up to 75% of your gross monthly income or £3,000, whichever is the lowest amount.

The money you receive from the mortgage protection insurance will go a long way towards helping you keep your mortgage payments up to date and will certainly give you a lot more in terms of financial assistance than limited State benefits offer.

How long will I receive the benefits for?

As the terms and conditions of a mortgage insurance policy will vary among different insurers, you need to check what the cover entails but usually a policy will pay you benefits for twelve to twenty four months, or when you get back to work, whatever happens sooner.

These tax free benefits will help keep a roof over your head at an already stressful time and give you peace of mind so that you can seek alternative employment or recover from your illness or injury, without added financial stress.

Different types of cover

There are different types of mortgage cover available to meet your own individual needs. While we have been discussing protecting yourself against accident, sickness and unemployment, you can opt to protect yourself against just unemployment or incapacity only. The type of cover you choose will be based on your personal circumstances, such as what your employer would provide in the event of long term sickness or redundancy. For example they may provide a very generous sick pay scheme so you may require unemployment cover only. Conversely, you may have been with your employer for many years and would be entitled to a good sized redundancy package and so would therefore only feel that you require incapacity insurance.

Whatever level of cover you decide to go with, there is no doubt that a mortgage protection policy will give you great peace of mind that should disaster strike, you would still be able to keep your home.