Mortgage protection insurance is one way to help cover your debt repayments in the event of losing your income. In return for a monthly premium, mortgage protection insurance covers mortgage repayments in the region of up to £3,000 per month.
If you lose your job or can’t work due to illness, and thus lose your main source of income, mortgage protection cover can help to pay the bills owed to your mortgage provider, typically for up to one or two years.
Although it’s usually an optional addition, insurers tailor protection policies to work alongside mortgage packages, while aiming to meet the demands of those who may not have the luxury of dipping into a large savings account at the first sign of financial trouble.
There are several other insurance policies designed to cover consumers’ debts in such an event, such as life insurance, income protection and critical illness insurance, so be sure to get all the facts before you take out a policy to protect your mortgage repayments.
With Uswitch you just need to fill in your details and decide what type of cover you require. For instance if you want your mortgage protection cover to also protect you if you're unable to work due to a critical illness, then you can select that option.
There are also options that cover a number of years rather than the entire duration of the mortgage repayment plan. This may suit those who know they'll have enough income within a set amount of years to be able to handle the rest of the mortgage should the worst happen.
Once you've filled out the short form, you can get a quote from a range of mortgage protection insurance suppliers.
You'll then need to decide which plan suits you, based on the amount of cover you get and how much you're required to pay each month to maintain that cover.
You can compare life insurance and other forms of mortgage protection cover with Uswitch.
Most insurers will not process a claim if it’s made within 60 days of signing up to the mortgage protection insurance policy, so if you do plan to purchase the cover then assess whether your job security and health can at least stand up to the initial period.
Likewise, some insurers will only cover repayments for up to one year, meaning you’ll have to go it alone if you can’t find a new source of income within that time.
There are also a number of instances where the insurer will not payout, which includes resignation, dismissal and voluntary redundancy. In some cases, incapacity as a result of a stress or back related injury will not be processed, so double check the small print.
The cheapest mortgage protection insurance options will usually come at the cost of a longer deferral period, which dictates how long you must wait until your first mortgage repayment kicks in after a claim.
The deferral period can range anywhere between 30 and 180 days, depending on the insurer and the price you’re willing to pay for your monthly premiums.
Insurers will usually payout directly to the mortgage lender on your behalf but some policies include an option for the money to go back to you. As a result, you may find that only a few insurers will cover the cost of additional bills.
The maximum payout you receive per month can depend on a variety of factors such as the premiums you pay, your most recent monthly salary and the size of your mortgage repayments. Depending on the insurer and the circumstances involved, consumers can get a maximum of around £1,500 all the way up to £3,000.
In some cases you may only be able to claim a percentage of your most recent monthly earnings so if you have a large mortgage to pay off, it’s worth checking out some of the alternative protection policies.
Mortgage payment protection insurance has its limits with regards to its cover for health issues and the length of time it protects. There are alternative options available for those seeking cover primarily for health reasons as well as long-term income protection.
Critical illness insurance can’t provide cover in place of a regular income like a mortgage protection scheme can, but it has more targeted benefits.
In the event of being diagnosed with a serious illness, a critical illness policy will pay a lump sum to help alleviate the cost of mortgage repayments and other bills. Such a policy is particularly useful if your employment benefits package or savings can’t cover the costs.
Another insurance policy for long-term incapacity is income protection, which pays you around half of your salary in the event of an accident or illness. Unlike mortgage protection insurance, income protection will usually pay out until you can go back to work or you reach retirement.
Both alternatives can be a more effective way of protecting your repayments in the event of illness but neither cover unemployment, which is where mortgage protection insurance has something to offer.
Mortgage protection life insurance is really just life insurance and could work out a better form of mortgage cover in the event of death, but it won't provide mortgage protection cover in the event of unemployment or critical illness.
Finally, it’s important to assess whether you need mortgage protection cover at all before you begin seeking out the best option for you – it all comes down what you can afford and the risk you're prepared to take.
*Based on an accidents, sickness & unemployment level of cover for a 30-year-old non-smoking male (March 2023)