Could you keep a roof over your head if you couldn't work due to an accident, sickness or involuntary redundancy?
Mortgage Payment Protection Insurance is a type of Income Protection that covers only your monthly mortgage payments, and related expenses, should you be unable to work due to an accident or sickness and, if required, unemployment.
Mortgage Payment Protection Insurance (MPPI) is no longer a popular solution as Income Protection Insurance has become simpler and more widely available, offering a greater level of flexibility and options than pure Mortgage Payment Protection Insurance.
A key, and very important, factor in not choosing Mortgage Payment Protection Insurance is that Income protection is fully medically underwritten when you take out the policy, so you know from the outset what you are and aren’t covered for.
A key and very important factor in not choosing Mortgage Payment Protection Insurance is that Income Protection is fully medically underwritten when you take out the policy, so you know from the outset what you are and aren’t covered for.
Mortgage Payment Protection Insurance, however, usually has the full medical checks at the point you put in a claim – which means, for example, that you can’t be certain any pre-existing conditions will be covered until a claim is made.
As an example, if you are 30, a non-smoker and in good health, then a premium of around £15 per month would provide you a monthly income of £1,000 for up to 2 years. For a monthly premium of around £30 you could extend the period it pays out from 2 years to 38 years (the number of years to state retirement for a 30 year old) should you be unable to work due to an accident or sickness.
Knowing you’ve chosen the right protection solution is only achieved if you have received professional advice. There are many Protection providers and each has their own specialisations and exclusions which means policies taken out online or without independent advice are often not paid out.
Lightblue Online was set up to provide specialist help to people unsure how to go about choosing from the many Protection products available. For example, some providers will only pay your monthly mortgage payments and related expenses for one or two years, whilst others may do so for longer. Monthly payments can be capped or a percentage of your income. So it’s important to make sure that if you’re buying a policy it’s the right one for you.
Our specialists will help you to navigate all the options to find the cover that is right for you and your family at an affordable rate.
Types of Mortgage Payment Protection
Finding the right one out of many types of protection could be very tricky. Here are the different types of mortgage payment protection suited for different needs and eligibilities:
An Accident & Sickness policy doesn’t pay an income if you’re made redundant or find yourself unemployed for any reason other than ill health or reasons of your own making.
The best possible income protection – ensuring that you will still have an income should you be unable to work through sickness, injury or you lose your job through involuntary redundancy.
A stand-alone policy should you lose your job through involuntary redundancy. It’s important to remember that if you choose Unemployment protection on its own it’s because you are worried you may lose your job, if this is the case you will also lose any protection for accident and sickness your company provided.
Mortgage Payment Protection Options
As with all things the more options you choose the higher the price. Mortgage Payment Protection is no different and different insurers load the options differently. It is therefore important to determine what you need and what you would like so we can find the best Income Protection policy available to you in the market place. Below are some of those options.
The number of weeks from when a policy starts before you can start to claim for unemployment. This can vary from Insurer to insurer but is typically 60 days.
The number of weeks or months you can survive on, for example, your savings or company sick pay before you need to receive the income from the insurer. The longer the period the cheaper the cost.
Typically 12 or 24 months or for longer term policies, if you are unable to return to work, up to your selected retirement age. The shorter the period the cheaper the cost.
Level or Indexed
‘Level’ means that the amount you receive will remain the same throughout the time you have the insurance regardless of whether your income or expenditure increases. Alternatively, the amount you receive can increase each year in line with inflation using either the retail price index or the consumer price index. With some insurers this can be declined on an annual basis.
Guaranteed premiums would suggest that what you pay stays the same throughout the policy term unless you increase the required income amount. For some policies this is true, you pay the same amount month after month until the policy ends. For others its guaranteed to increase based on a rate table which means the price you pay in the future for each £1 is guaranteed to go up each year at the rate set out in the guaranteed rate table sent with your policy. You can, therefore, calculate what your premiums will be in the future..
If your premium is not guaranteed then the premiums can change each year due to age or changes to your health. Reviewable policies usually start cheaper than guaranteed policies, but they may end up being more expensive.
Own or Any Occupation
When the ‘Own Occupation’ definition of incapacity is chosen the policy can pay out for any medical condition that prevents you from working in your own specific job role. When ‘Any’ is used the insurer will only pay you if you are unable to perform any occupation. ‘Own’ is more expensive than ‘Any’.
Waiver of Premium
If Waiver of Premium is selected then when you begin receiving an income from the insurance policy the premiums no longer need to be paid until you return to work or your selected pay-out period is reached.
Back to Work Benefit
Receive a percentage of your income if, on returning to work, the illness or injury you claimed for restricts your duties and you earn less. Some insurers will also pay a top-up should you start a different occupation that pays less.
Benefits in Kind / P11D benefits
Some insurers also offer the option of protecting the value of any employment benefits such as a company car or private health insurance.