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Mortgage Protection Insurance

Secure your home and protect your legacy from unexpected events! Mortgage protection insurance can be a great way to make sure your investment is safe in case of an unexpected event. This type of insurance will help you pay your mortgage if you are unable to do so yourself.

This article will discuss mortgage cover, how it works, who should apply, and more.

What Is Mortgage Protection Insurance? 

When the economy is tough, and money is tight, you can't help but wonder if you'll be able to maintain your lifestyle and meet your obligations should the worst happen - particularly if you are a homeowner paying off a mortgage. Luckily, there is a way of putting your mind at ease. Mortgage protection insurance can cover your monthly mortgage payments should you lose your job or start suffering from ill-health.

 How Does Mortgage Protection Insurance Work? 

council tax cost of your mortgage protection insurance

Mortgage payment protection insurance (MPPI) covers your monthly mortgage payments if you become unable to work. Because your mortgage goes down over time, your cover decreases over time. Depending on your insurer, payouts can last for a year (or more) until you get back on your feet.

Mortgage protection insurance policies are similar to term life insurance or decreasing life cover because they will cover your mortgage payments for up to two years.

What Does Mortgage Protection Insurance Cost?

According to Unbiased.co.uk, monthly premiums for mortgage payment protection insurance average around the £20-£25 mark depending on your personal circumstances, including your age, your mortgage repayments, your job, and your salary. The higher the level of cover, the more expensive your premiums will be. You can also opt for Back-to-Day-One coverage that covers you from the date you stop working and not the date of your claim.

According to moneysupermarket.com, a 30-year old accountant can expect to pay an average of £19.27 per both on a policy with a 60-day waiting period. The average climbs to £23.55 for 40-year olds and £24.14 for 50-year olds. The highest quote is at £44.23 for 50-year olds with additional risk factors, including smoking.

financial conduct authority small print about smoking

Will Being A Smoker Affect My Monthly Premiums?

Yes, smokers and vapers are usually targeted with higher premiums as they are deemed higher risk. Smokers are more likely to fall ill and claim from their insurance.

Does My Job Affect My Premiums?

Yes, some professions are seen as hazardous or high-risk, and as a result, professionals working in these fields are charged higher mortgage protection insurance, life insurance and accident and sickness insurance premiums. Class 1 risk level is the lowest risk and applies to professionals and office workers; Class 4 are the highest risk and usually perform heavy manual labour or unskilled work. Note that casual or fixed-term contract workers may be exempt from coverage based on your insurers' internal policies, so always double-check the qualification criteria.

 Who Needs Mortgage Protection Cover? 

Any homeowner with a mortgage will benefit from this protection. Your mortgage repayments are usually your largest bill. Londoners can spend up to 40% of their household income on their mortgage. If you are made redundant or left unable to work, you risk losing your home if you struggle to cover your mortgage payments. Mortgage protection insurance offers a valuable safety net.

Self-employed People Need Mortgage Protection Insurance the Most

They are unable to claim statutory sick pay or redundancy pay, as are people with pre-existing conditions or a family history of critical illness that may render them unable to work in the future.

When Can You Claim From Mortgage Insurance?

Mortgage payment protection insurance usually comes with an exclusion period that has to pass before you can claim and an agreed waiting period between the time you become unable to work and your pay-outs. This period can be as long as six months or as little as one month. You can time your waiting period to coincide with the end of your sick pay.

 What Is The Difference Between Mortgage Protection Insurance And Mortgage Life Insurance?

Mortgage protection insurance is different to mortgage life insurance in terms of its protection goals. Some policyholders want to protect their families and help them settle the mortgage balance in the event of their death (during the term of the policy). They would usually opt for mortgage life insurance, which pays a (largely) tax-free lump sum amount if the policyholder dies during the term. (Inheritance tax still applies).

mortgage payment protection policy

Others prefer holding a policy that would enable them to receive payments for a fixed period of time (after an exclusion period) to help cover their mortgage repayments if they are unable to work due to an accident, sickness and unemployment while they are still living. They usually opt for a mortgage protection policy so that they can receive payouts every month when they need to claim.

Alternatives To Mortgage Payment Insurance

Mortgage payment protection insurance might not be right for everyone, so it's important to consider who you would like to protect and what you would like to protect them against before making a decision. Some alternatives to consider:

Critical Illness Insurance

Critical illness cover is sold as an add-on alongside life cover. Bear in mind that only certain illnesses and stages of illness are covered. Some pre-existing medical conditions may exclude you from obtaining sickness cover. Critical illness cover will not cover you for redundancies or mental health problems.

Unemployment Cover

Unemployment insurance is a type of income protection insurance that pays out a lump sum if you become ill and unable to work. Most insurers offer unemployment insurance as a form of income protection bundled with accident and sickness cover.

Income Protection Insurance

Income protection pays a portion (usually between 40-60%) of your regular income. Income protection policies usually last much longer than your mortgage payment protection insurance's term, but the premiums usually cost more. Income protection can be used instead of critical illness cover to protect you if you are unable to work due to illness. Self-employed people can also apply for an income protection insurance cover.

Life Insurance

Many lenders require borrowers to take out life insurance cover when they apply for a mortgage. Your life cover doesn't replace mortgage payment protection insurance because it doesn't cover you in the event of redundancy or illness but pays a lump sum amount upon your death that can be used to cover your mortgage.

State Benefits

You might not need mortgage protection cover if you are eligible for benefits. Support for Mortgage Interest benefits will cover your mortgage interest, but it comes with lengthy first payment delays and doesn't cover the actual monthly repayment. It's not a form of insurance but rather a loan that needs to be repaid when your home is sold.

Redundancy and Sick Pay

If your employment contract is particularly generous when it comes to redundancy and sick pay, you may not need additional insurance cover.

Note that none of these options are true substitutions for mortgage protection insurance; merely alternatives to consider.

Lower the cost of Mortgage Protection Insurance

If you are worried about the cost of your premiums, there are a few tips and tricks you should try:

Check Your Life Insurance Policy

Ask your broker or advisor to check whether or not your existing life insurance policy includes mortgage protection as an add-on. If you already have some form of existing cover, you can reduce or even avoid additional coverage.

Consider Your Savings

If you have a good amount of savings, you can cover your mortgage and reduce the amount of protection insurance cover you'll need.

Confirm Your Employer's Benefits and Policies

Your employer may have serious illness or injury cover available as part of your employment contract that entitles you to a larger payout over and above your regular sick pay. This may provide a bridge that will cover your mortgage repayments while you wait out the deferred period per your insurance policy. The longer the deferred period, the cheaper the policy.

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Sebastian Graham

Insurance expert

Knowledge about insurance can not only save you lots of money, but also bring you peace of mind.

Support for Mortgage Interest (SMI) 

SMI or Support for mortgage interest is a loan paid by the Department of Work and Pensions to assist homeowners with their mortgage. It can only be used to cover the interest on your mortgage (up to the first £200,000) and needs to be repaid, with interest, when the home is sold. If the sale does not cover the loan amount, the outstanding amount is usually written off. Homeowners need to be on qualifying benefits to obtain this loan.

latest news new policies types of mortgage protection insurance


Our mortgage payments are often our biggest (and most important) monthly expense. There's no need to lose sleep worrying about covering your payments if you should become unable to work - mortgage payment protection insurance can relieve the burden of paying your mortgage if the worst should happen. Speak to your insurer or financial advisor about obtaining a mortgage protection quote. A small monthly premium offers significant protection when you need it most.

Mortgage Protection Insurance FAQs

Do I need life insurance for a mortgage?

Most banks and lending institutions require that you obtain life cover in order to qualify for a mortgage. The good news is that you can apply for decreasing cover that is reduced as you pay off your mortgage over time.

What is mortgage insurance protection?

Mortgage insurance protection (MPPI) is a form of insurance that will cover your monthly mortgage payments should you become unable to work due to redundancy or illness.

Do I need mortgage protection insurance?

Yes, homeowners that are still repaying their mortgage will benefit from MPPI policies. If you are self-employed or suffer from a pre-existing condition that might lead you to become seriously ill in the future, you may also consider an MPPI policy.

Is mortgage life insurance PPI?

Mortgage insurance is different to payment protection insurance, even though PPI is often designed to cover repayments like your mortgage costs if your personal circumstances leave you unable to meet your obligations. The primary difference is that mortgage protection insurance is usually paid to you directly, whereas payment protection insurance is usually paid directly to the lender and also cover unsecured finance (and not just your mortgage repayments).

Is mortgage protection the same as life insurance?

Not exactly. Mortgage protection is designed to cover your monthly mortgage payments if you become unable to work; life insurance is paid out as a lump sum in the event of your death. Mortgage protection insurance can be compared to term life insurance, but the protection goals are different.

What is MPPI?

MPPI is the abbreviation used for Mortgage payment protection insurance, a form of insurance cover that helps the policyholder make their monthly mortgage repayments for a specific term if they should be made redundant or become incapacitated.

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