Do you need mortgage protection insurance in the UK? Mortgage protection is an umbrella term for different policy types that help protect your mortgage payments. It’s common to have mortgage protection insurance, but is it mandatory in the UK?
To learn more about what mortgage protection is, the different types of policies, and whether it’s mandatory to have a policy in place, continue reading.
What is Mortgage Protection Insurance?
Mortgage protection insurance is a term used to describe several policies that are designed to pay off your mortgage if you pass away, or in some cases, become seriously ill during your policy term.
Essentially, the policy acts as a safety net in the unfortunate case that something happens to you, allowing your family (dependents) to continue living in the home without mortgage debt. The policy is typically referred to as a decreasing term, as the coverage lowers in line with the amount left on your mortgage balance.
Types of Mortgage Protection Insurance
Mortgage protection protects your finances if you pass away or, depending on the policy, become seriously ill. There are several options to consider.
Mortgage Life Insurance
Mortgage life insurance helps clear any outstanding mortgage repayments if you pass away during your policy term. In many cases, it pays your lender directly so that your family can remain in the home without the remaining balance falling to them.
However, standard mortgage life insurance policies may pay the surviving policyholder or your beneficiaries first, who can then use the money to make repayments themselves. Ultimately, who receives the payment to cover your mortgage depends on how the policy is set up.
Mortgage Payment Protection Insurance (MPPI)
Mortgage payment protection insurance (MPPI), also known as Accident, Sickness, and Unemployment (ASU) insurance, provides monthly payments for a set period of time if you’re unable to work due to illness, injury, or involuntary unemployment. The time period varies, but often lasts between 12 and 24 months.
Critical Illness Cover
Critical illness cover is often sold alongside mortgage life insurance policies to protect beyond just death. For example, if you’re diagnosed with a serious illness listed in your policy, you will receive money to cover essential payments, such as your mortgage payments.
In summary, this extra layer of protection broadens the cover from only paying out when you pass away to also paying out if you become seriously ill.
Type | Description | Payout |
Mortgage Life Insurance | Clear outstanding mortgage repayments if you pass away during your policy term | Lump sum on death |
Mortgage Payment Protection Insurance (MPPI) | Monthly payments are issued if you’re unable to work due to illness, injury, or involuntary unemployment | Monthly payments for 12 to 24 months |
Critical Illness Cover (additional) | Often added to life insurance to cover the diagnosis of specific serious illnesses, rather than just death | Lump sum on covered diagnosis, beyond death |
How Much Does Mortgage Protection Insurance Cost?
The cost of mortgage protection insurance is typically anywhere between £20 and £100 per month in the UK, depending on key factors such as the type of policy you choose, age, overall health, mortgage, and coverage level.
Mortgage payment protection insurance is typically more expensive than mortgage life insurance. However, please note that our figures are rough estimates and may likely vary depending on your personal circumstances and insurance provider.
Let’s take a look at three example estimates based on two common mortgage protection insurance policies – mortgage life insurance and mortgage payment protection insurance.
You are 30 years old with good health, and a £1,000 mortgage:
- Mortgage life insurance – Around £20 per month
- Mortgage payment protection insurance – £10-£20 per month
You are 40 years old with okay health, and a £1,000 mortgage:
- Mortgage life insurance – £20-£35 per month
- Mortgage payment protection insurance – £35-£55 per month
You are 50 years old with poor health, and a £1,000 mortgage:
- Mortgage life insurance – £45-£80 per month
- Mortgage payment protection insurance – £65-£100 per month
Is Mortgage Protection Insurance Mandatory in the UK?
Mortgage protection insurance policies are not legally mandatory in the UK, but they are strongly advised.
Although some mortgage lenders require things like building insurance when you’re securing a loan, they don’t require policies that cover illness, injury, involuntary unemployment, or death.
So, while mortgage protection is completely optional, it’s advised that you have a policy in place to cover repayments if something unexpected happens.
Should You Get Mortgage Protection Insurance?
You should probably get mortgage protection insurance if:
- You’re mostly concerned about being able to cover mortgage repayments if anything were to happen
- You have dependents in the home, and you’re the sole earner
- You have minimal or no sick pay, and no financial support
- You have no savings to fall back on
However, while mortgage protection insurance provides valuable cover, policies do come with exclusions:
- Pre-existing medical conditions
- Voluntary redundancy
- Fixed-term or zero-hours contract
- Suicide or self-inflicted injury
- Self-employment (in some cases)
Please note that exclusions depend on your insurer and the policy type, so may vary.
Advantages of Mortgage Protection Insurance
Mortgage protection offers several types of policies, all of which provide similar benefits to protect you financially:
- Peace of mind – Provides you and your family with reassurance that if anything happens, you will be financially protected.
- Coverage – Helps cover your mortgage if you die or become unable to work due to illness or injury.
- Illness or death – Policies often cover serious illness, such as cancer, and also death.
- Policy Choices – There are different types of mortgage protection policies to consider based on your circumstances
Overall, investing in a mortgage protection insurance policy provides reassurance that both your home and family are protected.
Finding the Right Mortgage Protection Insurance
At JG Mortgages, we have a specialist team of advisers who are on hand to provide you with the best-suited mortgage protection insurance product. We ensure you’re fully protected from the worst-case scenario by finding the right policy for you and your family.
Our team can answer any questions you may have along the way to make sure you understand all your options, how they will benefit you, and how they can cover your mortgage.
Please enquire with our team today to find out more about how we can help.
