When is mortgage insurance typically required?

When is mortgage insurance typically required?

26 May 2019

Whether you hear it referred to as mortgage payment protection insurance, MPPI, mortgage protection insurance or even just mortgage insurance, the overarching principle is the same. It’s all about protecting a person and their home by covering the cost of the mortgage should something unforeseen happen and the home-owner is unable to keep up repayments.
Cover is available to cater to various circumstances. There are generally three types of mortgage payment protection insurance: (1) unemployment only, (2) accident and sickness only, and (3) accident, sickness and unemployment.
The first of those three types of MPPI will, as the name suggests, only pay out in the event of redundancy. You are also required to be registered as unemployed with the government, and actively looking for work.
The second type of MPPI policy, meanwhile, will only protect you in the event that you suffer a long-term illness or accidental injury that prevents you from working.
If you wish to be covered against all of the aforementioned possibilities, then the third option – an accident, sickness and unemployment MPPI policy – might be for you. 

Do you actually need mortgage protection cover?

While the general principle of mortgage payment protection insurance is certainly sound, in terms of giving peace-of-mind and protecting those who need it, each person is different. So before starting to assess and compare policies, it’s important to carefully consider your circumstances.
For example, if redundancy's on the horizon, you're probably due a bumper redundancy package if and when that day comes. Alternatively, you may be confident of your eligibility for support from the Government if you're ever unable to keep up with your mortgage payments.
It’s also important to ask yourself whether you're already adequately covered by another policy. You may have permanent health insurance, for example, that pays out a percentage of your salary if you're unable to work due to illness or injury.
Even today, some employers provide their workers with some form of cover that overlaps with mortgage payment protection insurance, so this is something else you'll want to check out before requesting an MPPI quote.
Those are some instances where MPPI may not be wholly necessary. But even so it's worth a second look - as ever with these things, the devil's in the detail.
For example, if redundancy does hit, your payout might be delayed or challenged. It might not necessarily happen as you planned it. In that situation, statutory redundancy funds may not be adequate to meet your needs, even in the short term. And there's always the 'what if' scenarios around injury or illness; even if you're heading for redundancy.  In both cases, it's worth giving MPPI more consideration.
Let's say Government support is in place to safeguard your mortgage. You'll still need to meet certain conditions and criteria before payment begins - and the Government won’t cover anything more than your interest. By contrast, an MPPI policy can cover your full repayment and associated costs.
For those who have some sort of an employer mortgage protection policy, it's crucial to check if you're covered in the event of losing your job. Chances are you're not. In that case it's worth investing in unemployment-only MPPI, if only to plug the gap.
Talk to the LifeSearch team today about your options.

When considering how you can protect yourself, if you're suddenly unable to meet your mortgage repayment obligations, it's worth thinking beyond only the different types of MPPI policy that exist. A number of alternative forms of insurance are available to serve similar needs.
You might want to consider income protection cover, which may pay out for a longer period than mortgage insurance - such as until retirement or whenever you're able to return to work. Critical illness cover may also interest you due to its lump sum payout in the event of being diagnosed with a serious illness. However, do remember that this kind of cover provides a lump sum and not a steady, regular income.
There are a lot of options out there. And without help and advice it's hard to know which options will, given all the potential variables, best fit your circumstances.
So give the LifeSearch team a call today, on 0800 316 7253, to discuss your requirements with us in greater detail, or to ask for a competitive quote for MPPI or any of the similar products we provide.


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