How it Works

Describing Mortgage Payment Protection Policies in More Detail

Benefit

The amount of benefit that is paid out from Mortgage Payment Protection Insurance is set when the policy is taken out.

There is a maximum benefit that is normally linked to the amount of mortgage and mortgage related payments plus a margin of up to 25%. Additionally there will be a cap on the amount of which will vary from one insurer to another but is normally around £2000 per month, although some providers have a higher maximum.

Benefit is normally paid monthly to the policyholder after a set deferment or waiting period and is not taxable. This type of policy does not provide a cash in value at any time.

Cost

The monthly premium is generally a fixed amount per £100 of benefit. Some providers offer a fixed cost per £100 based on age, although other factors such as sex, smoking status, occupation and health are not normally taken into account.

Premiums are paid monthly throughout the term of the policy. Policies are offered on an individual (single) life basis. Some providers allow joint policies with cover split between applicants.

Deferment Period

The deferment period is the waiting time between the start of accident, sickness or unemployment and the start of payment of the benefit. It can also be called the waiting period or the excess period. The deferment (excess) period will normally be 30, 60 or 90 days paid monthly in arrears. As an alternative back to day one cover is available which will give cover from the first day of incapacity.

Example 1 - an accident and sickness policy with a 30 day excess can be claimed on after 30 days incapacity. The benefit will accrue daily from day 31 and will be due for payout on day 61.

Example 2 - an accident and sickness policy with back to day one cover can be claimed on after 30 days incapacity. The benefit will accrue daily from day 1 and will be due for payout on day 31.

The longer the deferment period the cheaper the monthly cost will be.

Term

The insurer will continue to provide cover whilst premiums are being paid. The policy will normally cease when the policyholder reaches 65.

Payment Term

Mortgage Payment Protection Insurance provides short term protection against accident, sickness and/or unemployment. As such the payment term of benefit is limited to either 12 or 24 months. A 12 month maximum payout will secure the cheaper premium. The benefit will normally be paid out until the sooner of return to work, death or reaching the maximum payout term.

Claims

In the event of a claim the insurer will require evidence of incapacity or unemployment, both initially and on an ongoing basis. This may include confirmation from an employer, doctor or, for self employed, an accountant.

Eligibility

Each insurer may have different criteria so it is important to check eligibility by referring to the providers Key Facts document and/or Policy Document. However in general terms to be eligible an individual must:

• Be at least 18 years of age and under 65 years of age
• Have been employed or self employed full time for 6 months prior to commencement of the insurance
• Be resident permanently in the UK, the Channel Islands or Isle of Man
• Have or be applying for a residential mortgage in the UK

Exclusions

Each insurer may have different exclusions so it is important to check these by referring to the providers Key Facts document and/or Policy Document. However in general terms the exclusions are:

Accident and Sickness

• Any illness or injury which exists at the policy start date
• Any self inflicted, drug or alcohol related illness
• Pregnancy related illnesses
• Mental conditions
• Back ache or related conditions

Unemployment

• Knowledge of pending unemployment as at the policy start date
• Misconduct which results in dismissal
• Resignation or voluntary redundancy
• Seasonal or temporary work
• Temporary cessation of trading (self employed only)

Get a Quote