Do I need mortgage insurance? What mortgage insurance covers

Make sure the cover offered suits your needs before taking out a policy 

For a monthly premium, mortgage payment protection insurance will pay you a set amount each month, usually for a period of 12 or 24 months, if you are unable to work because of accident, sickness or unemployment. For this reason, MPPI is also known as ‘ASU’.

As it only pays out for a limited period, it may not be the best form of mortgage protection for you. See Alternatives to mortgage insurance for more information on other options.

Mortgage protection policy options

You can take out a policy with just accident and sickness cover if you want to reduce your premiums. It’s also possible to get unemployment cover on its own, although many mortgage insurance providers have now stopped offering this. Around half of the providers we looked at still do.

When you take out the policy, you choose how much you would want it to pay out each month. Most policies let you also cover other monthly bills, such as utilities, as well as your mortgage.

The majority let you have a maximum benefit of between £1,500 and £3,000, and you may only be able to get up to 75% of your gross monthly salary, for example, or up to 150% of your monthly mortgage payment.
In addition, some mortgage protection policies don’t let you take the policy with you if you change your mortgage.

Waiting periods

The waiting period is how long you have to wait before the policy benefit starts, although providers may have other terms for this, such as ‘excess period’. It can range from 30 days to 180 days.

For example, if you stopped work on 1 September and the waiting period was 30 days, the policy would start covering you from 1 October.

Some policies, known as ‘back-to-day-one’ policies, don’t have a waiting period. All policies pay out in arrears, though.

In general, the longer the waiting period you choose, the cheaper the policy. If your employer offers you a period of sickness benefits, you may want to take out a policy with a waiting period that ends when these benefits end.

Qualification periods

In addition to the waiting period, you will also need to be off work for a certain number of days before you can actually make a claim – often called the 'qualification period'. For policies with waiting periods, the qualification period is usually the same. But for back-to-day-one policies, it can range from 14 to 90 days.