Mortgage Protection Insurance by Polly.co.uk

Mortgage Protection Insurance

Taking out a mortgage is a big responsibility, probably the biggest financial commitment most of us will ever make in our lives. Have you made sure that, whatever happens, you can keep up your mortgage repayments? Read on to find out more about how Mortgage Protection Insurance can help you protect your most significant investment in life.

Please note, unemployment cover is not currently available in the UK insurance market due to the continuing impact of the global pandemic. Therefore, we advise you to speak to an FCA-approved expert from Polly.co.uk who may be able to help you find a reasonable alternative protection plan.



What is Mortgage Protection Insurance?

Mortgage Protection Insurance is a type of mortgage cover insurance plan specifically designed to help you pay towards your mortgage if you were to become ill, unable to work, or if you suddenly became unemployed.

These plans are sometimes referred to as mortgage payment protection insurance (MPPI) or income protection insurance. The level of cover you can choose on one of these plans varies from insurer to insurer. In some cases, you can claim if you have an accident resulting in severe injury, a serious illness, or if you are made redundant from your job. In some cases, you can opt for a policy that covers all three of these instances.

MPPI products, therefore, can be a wise and affordable choice for self-employed professionals who are not eligible for sickness or redundancy pay.

There is also a similar mortgage protection product on the UK market, called mortgage life insurance. This type of insurance policy (also known as mortgage life assurance) works slightly differently from an MPPI in that this will pay out a one-off tax-free lump-sum payment upon your death. This money then goes to your mortgage lenders to help clear the remaining cost of your mortgage loan. This type of life insurance to cover mortgage payments only is also known as decreasing term life insurance (i.e., the amount paid out decreases over time, in line with the amount you owe towards your repayment mortgage).

So, now that you know that there are many mortgage protection plans available, how do you choose the right one for you?



Top Mortgage Protection Tips

What does a mortgage protection policy cover?

As there are different life insurance and mortgage protection insurance plans on the market, the amount of coverage you can sign up for varies. For instance, if you want a very affordable policy that only pays out if you pass away within the policy term, you may want to opt for a mortgage decreasing life insurance plan.

Alternatively, if you want to ensure your mortgage is paid while you are out of work, an income insurance plan or MPPI plan could offer you a monthly payment that could pay towards your mortgage loan.

A typical MPPI plan can cover 65% of your gross annual salary for up to 18 months if you need to make a claim. The cap on how much the policy pays out every month is because this income is not subject to conventional taxes, and you can still claim on non-means-tested government benefits while taking out this type of cover. You can also find deals that work well with various mortgage plans, such as repayment or interest only.

Should I get Mortgage Protection?

Mortgages are one of the most expensive loans most people will ever take on in their lifetimes. Therefore, you will want to make sure that your partner and children could pay off that debt without having to sell up and downsize if you were to die unexpectedly.

Your mortgage lender will likely ask that you sign up for some form of home buyer insurance if you pass away before the mortgage loan is repaid. However, if you think that you would need a more substantial payout for your loved ones and would like to leave them some money as a gift, you may wish to look for Level Term Life Insurance or Whole of Life Insurance.

If you are a homeowner and have already paid off your mortgage loan, you may wish to look for Whole of Life, Term Life, or Over 50s Life Insurance.

Self-employed people may also benefit from setting up mortgage payment insurance plans that offer you monthly payouts to help you with your bills.

What are the different types of mortgage protection?

As mentioned previously, there are many options for home buyers protection insurance. You may wish to consider:

  • Mortgage Life Insurance
  • Decreasing Term Life Insurance
  • Level Term Life Insurance
  • Family Income Benefit (like level term life insurance, only the lump sum is released in installments to your family members after you pass away)
  • Whole of Life Insurance

And if you want to protect your mortgage payments for up to 18 months within your mortgage term, you may want to consider:

  • Mortgage Payment Protection Insurance
  • Income Protection Insurance (including shorter-term income protection and long-term income protection policies)
  • Critical Illness Insurance

Here is an example of an average monthly premium cost for a 30 year old, healthy, non smoker

Person AAverage Monthly PremiumAverage Income Protection Payout
30-year-old, non-smoker, healthy BMI£12.50£1,000 (a month for sickness or injury)


Frequently Asked Questions

When taking out mortgage payment protection insurance, you can decide how much you would like the policy to pay out per month if you need to make a claim. In many cases, providers may cap the monthly payout amount to around £1,500 - £2,000.

Successful claims then take around 30 to 180 days for the money to be released to your bank account. Your plan may also allow you to receive payments for up to 18 months while you are out of work (on a shorter-term policy), or up to retirement if you are on a long-term plan. When taking out an income protection/mortgage protection plan, you can choose a policy that has a shorter or longer ‘minimum period claim’ depending on how long you wish to wait before you can claim money for being out of work. It goes without saying that the shorter the minimum claim period, the higher your monthly premiums might be.

It is not a legal requirement to have mortgage protection insurance. However, if you apply for a mortgage loan, many lenders will stipulate that you must have some form of financial safety net in place should you pass away within the mortgage term.

In many cases, people who take out a mortgage follow the advice of their lender and take up a mortgage protection plan that the lender recommends explicitly. It is worth noting that lenders are tithed to a handful of insurers in many cases, and you may be able to find a cheaper or more comprehensive plan if you shop around with the help of a service like Polly.co.uk.

Deciding which type of mortgage cover you need will depend on how much you can afford to pay each month, how much money you need as a ‘buffer’ and how you will pay off your entire mortgage if you were to pass away suddenly. Therefore, it is crucial to speak to an expert who can explore the whole of the UK market for you and find you a deal that ticks all your ‘must have’ boxes.

It is also worth noting that the type of occupation you have may also affect how much cover you need. For instance, some employees may have Death in Service Benefit - which will pay out a lump sum if you die while working for a company. In contrast, a self-employed person may need a financial safety net, in the form of income protection insurance, which will pay out if you come down with an illness that prevents you from working for an extended period.

In many cases, you will need some form of mortgage life when buying a house with a mortgage, as you will need to make sure that the full loan can be repaid if you were to pass away.

However, if you are only looking for help with your bills if you become ill, you may not require MPPI if you are employed by a company that has a generous sickness and redundancy pay package.

In many cases, if you are applying for a mortgage, lenders will ask that you take up an insurance plan that will protect your repayments if you were to pass away. You can also be accepted for a mortgage without needing to take out income protection insurance or critical illness cover – but this may be a big help to your finances if you were to fall ill within the loan term.

Depending on the cover you opt for, your will beneficiaries can claim on your insurance, and the money from a mortgage life cover plan will be sent to your mortgage lenders as repayment. If you opt for a decreasing life insurance plan, your will beneficiaries will not receive any further funds as a monetary gift. However, if you have level term life insurance, your loved ones can make a claim, use the payout to clear the mortgage debt, and keep the remaining funds as a tax-free lump sum payment.

You can apply for a mortgage protection plan if you are self-employed. You may, for instance, wish to look at income protection insurance (which can cover you for accidents, sickness, and unemployment). If you are looking to protect yourself financially from serious and terminal illnesses like cancer, critical illness cover may also be a good option for you.

If you take out a mortgage protection cover product that provides income support, you can claim if you are made redundant from your employer. However, when taking out a policy, you will be asked if you are at risk of being made redundant. In this instance, if the answer is yes, you may not claim for this type of cover. Therefore, when signing up for this, and any other kind of insurance, it is always best to be completely honest about your circumstances, as any subsequent claims on your insurance may be rejected if you were less-than-honest in the policy application stage.

It may be difficult to claim your mortgage protection insurance for mental health reasons. In most cases, you will need to provide medical verification that your mental health has prevented you from returning to work for an extended period.

It is also important to note, pre-existing medical conditions may be excluded from some income and mortgage protection plans.

Why Use Polly.co.uk

Since our launch in 2015, we have helped over 500,000 UK mums towards protecting their family with affordable life insurance and protection products. Every 22 minutes, a child loses a parent they depend on financially, but despite this over 12% of UK Mums still have no life insurance to protect their family if the worst happened.

It was clear there was a problem, yet no-one was talking about it, so we launched Polly.co.uk.

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