Do I need mortgage protection insurance?
20 Jan 2021
As if mortgages weren’t confusing enough at times, you start hearing about mortgage protection insurance - or mortgage insurance, mortgage payment insurance, and MPPI.. What are these products, and do you need them? Well, no - you do not need mortgage protection insurance, or MPPI (mortgage payment protection insurance). They’re not a mandatory requirement for obtaining or retaining a mortgage. They are, however, a very handy insurance product to have in their own right.
You don’t need us to tell you that a mortgage is a pretty big deal. It’s the roof over yours and your family’s heads and probably the most expensive thing you’ll ever pay for over the course of your life.
Mortgage protection insurance does what it says on the tin - protects your mortgage.
What is mortgage protection insurance?
Let’s start with the basics. Mortgage protection insurance sits under the life insurance umbrella. That’s because, much like life insurance, it provides your beneficiaries with a payout if you pass away. A mortgage protection insurance payout is designed to provide funds to cover the mortgage that you may be leaving behind.
Mortgage protection insurance runs for the same length of time as your mortgage. If you take out a mortgage over 30 years, your mortgage protection insurance must also be in place for 30 years. If the payout provided is more than what’s left to pay on the mortgage, it automatically passes over into your estate.
As valuable as it is, not everyone with a mortgage needs mortgage protection insurance. If you live alone and you’re the only person who pays towards your mortgage each month, then this product probably isn’t worth your pennies. If you were to pass away, the house would simply be sold on to pay off the mortgage.
On the other hand though, if you have a partner and/or a family that relies on your income and lives in the home, they are most likely going to need some help paying the mortgage without you around. With this in mind, just because mortgage protection insurance isn’t mandatory, it doesn’t mean you shouldn’t bother getting it.
The different types of mortgage insurance
Mortgage insurance can be amongst the most confusing of insurance products, simply because there are a few different types and they all work slightly differently. Mortgage protection insurance is the product we talk about here at LifeSearch, designed to provide a lump sum to pay off your mortgage in the event of your passing.
You might also come across mortgage payment protection insurance, or MPPI. This is designed to cover your mortgage repayments if you’re out of work with illness or injury, or if you lose your job. It prevents you from having your house repossessed if you’re not in a position to pay your mortgage. In this way, mortgage payment protection insurance is very similar to income protection insurance. LifeSearch does not offer advice or options on Mortgage Payment Protection Insurance (you may want to speak to your lender about that) but we can help with Mortgage Protection Insurance and also Income Protection.
Mortgage protection insurance is the safety net that your family needs when you’re no longer around, that allows them to stay put in the family home. Losing a loved one is hard enough without financial stresses alongside. If there’s anyone in your life who currently relies on your wage to pay the mortgage, seriously consider this insurance product.
If you’re after an insurance product to cover your mortgage payments whilst you’re still around, like mortgage payment protection insurance, we’d suggest talking to your mortgage lender or if you want to talk to us here at LifeSearch about income protection insurance which could cover other bills not just your mortgage give us a call. Income protection payouts can cover all your bills in a successful claim - not just your mortgage. It’s worth checking if you are eligible for government support if you became ill or couldn’t work for whatever reason, or you may have cover included in your employment package. Mortgage payment protection insurance - or income protection insurance, for that matter - may just be duplicating this cover.
Don’t worry - you’re not expected to navigate the world of mortgage protection insurance alone. If you need some guidance, turn to us at LifeSearch. Give us a call on 0800 316 7253 and we’ll get you on the road to mortgage protection.
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