Mortgage Payment Protection Insurance / MPPI

Mortgage Payment Protection Insurance is an optional insurance to help you in the event that you cannot cover your mortgage repayments due to an accident or illness that prevents you from working, or if you are made redundant. It can be a useful option for those who do not have enough savings to cover an unexpected period of reduced income. In return for cover, you pay a monthly premium which varies between insurers.

In some cases, your lender will only accept your mortgage application if you take out MPPI. As it can increase the cost of your mortgage, you should think carefully about whether it is necessary for you and your situation. Many mortgage lenders will offer you their own MPPI cover when you apply for their mortgage: you are under no obligation to take out their insurance. In many cases, insurance offered by an independent provider is cheaper and more comprehensive than that offered by your mortgage lender. In addition, remember that you can take out MPPI at any point during your mortgage term, which means you can shop around for the best deal before making a final decision.

MPPI from your lender usually covers you for sickness, accident and redundancy. The benefit of buying insurance from an independent provider is that you can tailor the policy to suit your situation. For example, if you are in a very stable job where you are unlikely to be made redundant, you may be able to remove redundancy cover in return for a lower premium. If you already have insurance that covers you in the event of redundancy, illness, or an accident that prevents you from working, but consider MPPI beneficial, ensure that you are not paying for duplicate cover. For example, if you already have private health insurance that covers the cost of illness, buying 'redundancy-only' MPPI cover can extend your protection at minimal cost.

Typically, the insurer will only pay out after thirty or sixty days, which means that you are usually required to fund at least one mortgage repayment yourself. Most policies only pay out for a maximum of twelve months: after this period, you must find alternative income to enable you to make repayments. If you already have savings that would cover twelve repayments, you may consider this insurance an unnecessary expense.