Expert Guides First-Time Buyers
Home Movers
Buy-to-let
Remortgage
Whether you are looking to review an existing mortgage or buying a house for the first time, the whole process can
be extremely daunting. At Town & Country Mortgage Services we're here to make it as simple and stress free as
possible, so it’s important that you understand how it works. We hope you'll find our expert mortgage guides a helpful
starting point. Once you're ready to discuss your mortgage requirements in more detail, one of our expert qualified
mortgage advisers will be on hand to help you and guide you through the whole process. There’s also no need to
make an appointment – our award-winning, fee free mortgage advice is just a phone call away.

Home / Expert Guides / Payment Protection Guide

What is Mortgage Payment Protection Insurance?

Mortgage payment protection insurance, or MPPI, protects you if you’re unable to work due to redundancy, illness or an accident that meant you couldn’t work. If the worst should happen and you lose your income, you’d still be responsible for your monthly repayments or you would be at risk of losing your home. 

While many people wonder ‘what is mortgage protection insurance and why do I need it?’, the reality is that this type of insurance product can prevent you losing one of your biggest and most expensive assets. It differs from life insurance and similar products in that it is designed specifically to allow you to continue paying off your mortgage even when you’re no longer receiving a stable income. 

In this guide, we will answer a range of questions, from what is mortgage payment protection, the benefits of choosing this type of insurance and the average costs associated with mortgage protection insurance. *Payment Protection Insurance is optional. There are other providers of Payment Protection Insurance and other products designed to protect you against loss of income.

Contents

Getting Mortgage Protection insurance during Coronavirus

How has COVID-19 affected insurance policies and can you still get MPPI during the pandemic? We outline what’s changed and what to expect during coronavirus. 

How much is Mortgage Payment Protection insurance? 

Mortgage payment protection insurance costs depend on several factors – in this section, we explain how prices can vary and the average cost of MPPI for each age bracket. 

How much payment protection insurance do I need? 

Knowing how much payment protection insurance to take out can be difficult and there are a few things to consider. In this section of our MPPI guide, we explain what to think about when choosing the level of cover that’s right for you. 

What is the difference between mortgage protection and life insurance?

Mortgage protection and life insurance may seem like similar products, but there are distinct differences to be aware of. In this section of our guide, we explain what each of these products provide. 

Why you need Mortgage Protection insurance

A common question is ‘why do I need mortgage protection insurance?’. As mortgages are such a huge financial commitment, it makes sense to have cover in place to protect your biggest asset. We explain why MPPI is so valuable and the benefits it offers. 

Can you cancel payment protection insurance?

What happens if you change your mind about your payment protection insurance? In this section, we explain whether it’s possible to cancel an insurance policy. 

What are the benefits of mortgage payment protection insurance?

MPPI can provide several benefits, not least in ensuring that your home is secure if you’re unable to work. We highlight a few of the reasons why you should consider a mortgage payment protection insurance policy. 

What’s the difference between PPI and Mortgage Payment protection?

PPI and MPPI may sound similar, but they are in fact different products. In the final section of our guide, we explain the difference between these two insurance policies. 

Getting Mortgage Payment Protection Insurance during Coronavirus

Coronavirus has led many people to worry about their jobs and incomes, and to seek out options to prevent financial difficulties in the future. But the spread of COVID-19 has impacted the insurance market in various ways, with some insurers adding coronavirus-related exemptions to new policies. 

Many insurers, and comparison sites, have temporarily suspended quotes for new income protection policies until there is greater stability surrounding the pandemic, given the spike in enquiries around income cover. Others may review each application on a case by case basis. 

If you buy insurance cover now, pre-existing conditions won’t be covered, but all protection should be purchased with both the short and long-term in mind. If you need further advice, it can be beneficial to speak to an insurance specialist who can assist you. 

1: How much is Mortgage Payment Protection insurance?

When it comes to any type of insurance product, understanding how it will impact you financially on a monthly basis is key. So, how much is mortgage protection insurance? The answer depends, as mortgage protection insurance costs are based on several factors including:

  • Your monthly mortgage repayments
  • Your age
  • Your salary
  • The policy you choose

The average cost of mortgage protection insurance varies depending on your age bracket, costing around £19 for a 30 year old, £23 for a 40 year old; and just over £24 for someone in their 50s. Depending on your insurance provider, it can be less than £10 per month, but it’s important not to choose a provider simply because they are the cheapest. 

2: How much payment protection insurance do I need?

One of the first questions people wonder when discussing payment protection insurance is ‘how much mortgage protection do I need?’. In order to determine the answer to this question, you need to work out if you want just your monthly mortgage payments covered or other bills as well. 

Insurers will usually pay a set amount each month for a set period, usually up to 2 years. But you may be able to choose how the policy will pay out depending on the provider, such as just paying out to cover your mortgage payments, or pay out more to cover the cost of other bills as well. If you choose this option, providers will normally pay out 125% of your mortgage payments. Alternatively, you might choose to base your cover on your salary, resulting in providers paying up to 50% of your monthly income. 

3: What is the difference between mortgage protection and life insurance?

So, what is the difference? Mortgage protection, life insurance and similar insurance policies can all seem like the same product but there are differences to be aware of. 

The difference between mortgage protection and life insurance is that the latter pays out to someone you nominate when you die, such as a partner or a dependent. It provides them with financial security when you’re no longer able to support them. Term life insurance protects you for a set period of time, while whole of life insurance lasts until you pass away. 

So what is mortgage payment protection insurance? Mortgage protection is designed to pay a monthly benefit towards your mortgage repayments if you can’t work due to an accident or illness, or unemployment. It is specifically for this debt and doesn’t pay out in a lump sum, unlike some other insurance products. 

4: Why you need Mortgage Protection Insurance

There are several reasons why mortgage protection insurance can be advantageous. But because it’s not compulsory when you buy a property, many people still wonder ‘do I need mortgage protection insurance?’. 

One of the reasons why payment protection insurance is beneficial is that many people don’t have adequate savings to cover their mortgage repayments if anything happens with their job. In fact, it’s estimated that 1 in 4 people in the UK have less than £500 in savings in the bank for such emergencies. 

If you have a mortgage, it’s likely to be your biggest expense and with such a huge financial commitment to make each month, having protection to cover these repayments if you’re unable to do so through your job is vital. If you had to default on your mortgage due to an accident, illness or unemployment, you would risk losing your home. 

5: Can you cancel payment protection insurance?

If you want to cancel payment protection insurance, you usually have 30 days to do so from the day you take out the policy, and you’ll get a full refund. If you want to cancel after this time, the money you’ll be refunded might be less than what you’ve put in, but this will depend on the terms and conditions of your specific policy.

6: What are the benefits of mortgage payment protection insurance?

Why get mortgage protection insurance? For most people, a mortgage is likely to be one of the biggest expenses you have each month, and if you don’t keep up with the repayments, you could risk losing your home. One of the key benefits of mortgage protection is that you have peace of mind that your home is secure if you lose your job or are unable to work. 

Depending on the policy and provider you choose, the benefits of mortgage protection insurance can include: 

  • Tax-free monthly payments of a percentage of your gross income
  • Repayments of related bills, such as council tax, utility bills and internet services
  • Backdated payments from the date you stopped working
  • Support in finding a new job if you lost you position through redundancy 

7: What is the difference between PPI and mortgage protection insurance?

When you’re looking into mortgage protection insurance, you may wonder: is mortgage protection insurance the same as PPI? While MPPI is a slightly cheaper alternative to income protection, there is a notable difference between PPI and mortgage protection. The latter should not be categorised as the same product as PPI which has gained a negative reputation due to being mis-sold to thousands of customers over the years.

PPI covers unsecured finance like loans or credit cards and is paid to the lender, while mortgage payment protection cover just pays out for your mortgage payments and is paid to you directly. Both are designed to offer protection for a single debt but they are different products. 

Find out more

Choosing the right MPPI policy can be tricky, but Town & Country Mortgage Services can help. We have a team of qualified insurance experts who can offer advice and guidance when choosing a mortgage payment protection insurance policy. Contact us today for more information. 

Need more advice?
Ask one of our expert mortgage advisers.

Buy now