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Do I Need Mortgage Protection Insurance?

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Mortgage protection insurance is a type of income protection that will cover your mortgage payments if you’re out of work due to an accident, sickness or unemployment.

If you are asking, do I need mortgage protection insurance? It’s really down to you on what you think is necessary. It is not a legal requirement of a mortgage lender

What is a mortgage protection insurance?

A mortgage protection policy is designed to help you with mortgage repayments if you end up in circumstances that make it difficult or impossible to keep up-to-date with your repayments. 

You can apply for an MPPI if you are employed, self-employed or a contract worker – providers will vary so always check for any exclusions.

Similarly, providers will vary in terms of what they cover and for how long. They may cover the monthly cost of your mortgage, usually with a one-year payout period. 

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Do I need a mortgage protection insurance legally?

There are no laws saying you need MPPI, it is not a compulsory policy. However, it is sometimes a condition of a loan to guarantee protection for the lender as well as you, the borrower. 

Having said that, we do always advise homeowners to consider one question; If your income was stopped tomorrow or if you become ill, could you afford to make your mortgage repayments on time?

If you had any doubt when answering this question, we highly recommend looking into home loan repayment insurance.  

Failing to keep up with the mortgage repayments can result in repossession of your home, so you should do everything in your power to protect yourself and mortgage payment protection insurance is a wonderful safety net for hard times.

MPPI is technically a form of ASU (Accident Sickness Unemployment) which, since the start of 2020, has become very difficult to get.

The different types of mortgage protection policies

There are three main types:

  • Income protection – will cover some or all your regular income if you are too unwell to work.
    • It covers regular monthly commitments like your mortgage repayments. It will pay for a set amount of time or until you are fit to work again.
  • Critical illness – will cover you if you fall seriously ill
    • The cost is set when you take the policy and you pay a lump sum. Policies vary so always check what you’re getting before you commit.
  • Life insurance – gives financial security to a nominated individual if you are no longer around to support them. 

What does a mortgage protection insurance cost?

Mortgage insurance costs are based and calculated on many variable factors. There is no one-size-fits-all and individual quotes are based on their unique circumstances. 

Factors that can impact your mortgage protection insurance quote will include (but is not limited to):

  • Age
  • Occupation – If your job is a high risk, your premium might be higher
  • General Health – Current weight, health, family medical history etc.
  • Current Lifestyle – Activity levels, sports players etc.

The average cost of mortgage protection insurance also varies depending on the level of cover you purchase.

Joint mortgage protection insurance policies

You have a couple of options for mortgage protection insurance when you are in joint property ownership; a single policy or a joint policy

With joint homeownership, both partners often take out mortgage protection cover, but there is nothing to state that both parties NEED cover. If one homeowner covers the entire cost of the mortgage with their income, there wouldn’t be any need for the second party to have mortgage protection cover. 

However, if both partners contribute to the mortgage repayments, you should both consider cover. Joint mortgage cover might be cheaper than two individual policies so it’s worth checking out. 

Claiming on a protection policy

Mortgage protection companies put exclusion periods in place to stop policyholders from taking out insurance AFTER they have suffered the injury or illness, for example.

Aside from the exclusion period, you should check the T’s & C’s for details of any ‘agreed waiting periods.’ An agreed waiting period is the time between you becoming unable to work and the payouts from the insurance company starting. Also known as a ‘deferred period’, this time frame could last from one to six months.

You can receive back pay for any mortgage payments you make during your deferred period by taking out ‘back to day one cover’, but this could increase your monthly premium.

Speak to a mortgage adviser

If you’re still unsure whether your unique circumstances warrant mortgage payment protection insurance, then speak to a professional mortgage advisor. Not only can they talk you through the protection process, but they can also advise on other insurance policies that you might want to consider when buying or selling a home.

Move iQ’s recommended mortgage adviser can help you find the right mortgage and discuss your cover.

Find Your Mortgage

Your home may be repossessed if you do not keep up repayments on your mortgage.

Last Updated: January 19th, 2024

Phil Spencer

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