Mortgage payment protection insurance

Mortgage payment protection insurance

Mortgage payment protection insurance (let’s call it MPPI) is a safety net that catches you if you’re suddenly unable to pay your mortgage.

If you’re buying a home it’s definitely worth thinking about MPPI. After all, your mortgage is likely to be one of your biggest outgoings, and if you suddenly lose your income paying it could be very tricky. Nobody wants to lose their home as well as their cash flow!

If you suddenly lose your earnings your MPPI will cover repayments until you’re back on your feet, although it’s important to remember that there’s usually a cap on how long you can claim for.

Which MPPI should I choose?

There are three main types of MPPI, and they each cover you under different circumstances: 

  • Some policies only protect you if you’re made redundant
  • Some policies only protect you if you have a long term illness or are severely injured
  • …and some policies cover both.

Just like all kinds of insurance, every policy has its own small print as well. This is where an insurance broker can help, as they’ll find out what you want from your cover and make sure the policy you choose is suitable for you.

Things they’ll look at include:

  • Time before you can claim on your policy, as sometimes you have to sit through a ‘waiting’ period before the payments kick in.
  • An exclusion period, which means you have to hold the policy for a certain amount of time before you can make a claim.
  • Whether or not you already have a long-term health condition that affects the likelihood of you claiming.
  • The amount paid out, which could be ‘mortgage only’ or ‘mortgage with bills’. Sometimes you can get a percentage of your salary instead.

Alternatives to MPPI

Mortgage payment protection insurance isn’t your only option. It depends on what you want from your cover.

Term life insurance won’t pay out unless you pass away, but it does mean your family will be able to pay off the mortgage. This might be a suitable choice if you’re mainly worried about your dependents in the long term.

Income protection is usually pricier than MPPI, but instead of just covering your mortgage, it protection a certain amount of your income – which means payments can help cover other things, too. 

Critical illness cover pays a lump sum (not ongoing) if you’re diagnosed with a serious illness.

As we’ve said, all policies are different and it pays to read the small print and understand what you’re protected against. Your Scout broker will help you understand the nitty-gritty so you can put it to the back of your mind and get on with life!

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