Payment Protection Insurance on Mortgage

The biggest chunk out of your salary is most likely your mortgage payment. But if something were to prevent you from making the payment, you would be in deep trouble. To avoid panic when the crisis hits, every homeowner must get payment protection insurance on their mortgage.

Now what might threaten your income in a way that mortgage payments might be at risk? It could be redundancy or illness or death. Now, there are two ways out of this and unlike regular PPI, this is paid to you instead of the lender.

Payment protection insurance on the mortgage (specific insurance)—this is also called mortgage payment protection insurance or MPPI and takes care of your mortgage payments if you do not have a steady income for three reasons:

Accident and illness only
Redundancy only
Accident, illness and redundancy

All policies come with a waiting period that ranges from 30 to 180 days. Anyone in the age group of 18 to 65 years of age can take out one of these policies. The minimum conditions are that you must be living and employed in the UK.

General Income Protection Insurance (Not Specific): This is an insurance policy plan where the payout will be made to your dependents but they can use it for more than just your mortgage payment.

The Cost of Insurance

This depends on a range of factors usually decided by the insurer. But here’s what is the standard.

The older you are, the more likely you are to claim for accidents and illnesses. So, expect to pay high premiums.

The length and amount of cover you need is also a big factor because that decides how much the insurer has to pay for you should things go wrong.

If you are a smoker, you invite serious illnesses and this is backed by science. So, you will be paying more.

What Is Not Included?

This usually depends on the specific insurer you pick. But we can make some broad generalisations to save you from the obvious pitfalls.

If you have a pre-existing medical condition that might be a problem when getting payment protection insurance on the mortgage. But it is tricky to find out because these clauses are not always underwritten.

You can also rule out self-inflicted injuries. Pregnancy and childbirth situations also are not covered.

In cases of redundancies, you can forget about a payout if you were at risk of unemployment and were given a warning and a notice. This is also true for dismissal due to misconduct on your part.

Exclusions are also applied to you if you are a part-time or temporary employee. Voluntary unemployment to pursue something else is also an exclusion because that’s a choice you make.

The Bottom Line

If you want to qualify for a PPIon mortgage, you want to do this at the right time so that the premiums are under control. You want to try and quit habits like smoking. Office workers with a steady job certainly have the advantage. And you need to be secure enough to be able to handle your payments till the waiting period is over.