Mortgage protection insurance is protection that covers your monthly mortgage repayments if you can no longer afford them due to a range of circumstances. It can prevent you from defaulting on your mortgage and therefore avoid repossession of your home.
Sometimes called mortgage payment protection insurance, is a type of policy that helps to pay your monthly mortgage repayments if you can’t work due to illness, a serious injury or redundancy.
If you have been out of work for a specific amount of time (generally between 30 to 60 days), your insurance will pay you a set amount each month. You may be able to get cover for your bills too, which means the provider will usually pay 125 per cent of your mortgage. Usually, you only receive payments for up to 12 months or two years, depending on the policy.
How much does it cost?
Mortgage protection insurance usually has monthly premiums around £20-£25 but you can find a deal for less than £10 if you shop around. Your premiums however, are calculated based on your circumstances, including your age, salary, mortgage repayments and your job. For example, if you’re in a desk-based job, you will be at lower risk of serious injury than if you do manual labour, which will help to bring your payments down.
The different types of mortgage protection insurance
There are three types of mortgage protection insurance which cover different circumstances:
- Unemployment policies only pay out if you can’t work due to redundancy
- Accident and sickness policies only cover you if you can’t work because you have become seriously ill or had an injury
- Combined policies also exist that cover for both unemployment and accident/sickness
Mortgage protection insurance isn’t compulsory but we would advise that you think carefully about how you will keep up mortgage repayments if you find yourself out of work for a while. Other alternative methods of insurance could also work such as income protection, critical illness cover and/or life insurance.
If you would like to speak to us about advice around the best protection insurance for your circumstances, then please get in touch.
*Please note: These types of plans typically have no cash in value at any time and cover will cease at the end of term. If premiums stop, then cover will lapse.