Is Mortgage Payment Protection Insurance the same as PPI?
, by Matt Stevens
Unexpected events can happen at any time in life, making it difficult to keep up with important payments like loans or mortgages. In such cases, Payment Protection Insurance (PPI) can provide a safety net, ensuring that these financial commitments are met, protecting both you and your lender until you're back on your feet.
If you're considering Payment Protection but feel overwhelmed by the terminology or unsure which type best suits your needs, don't worry. Our guide is here to help you navigate the differences and similarities between various protection options, especially PPI and MPPI.
What is Payment Protection Insurance?
Payment Protection Insurance, or PPI, offers financial support for monthly debt repayments, such as credit cards or loans, if you're unable to work due to illness, injury, or unemployment. It ensures that your debt is managed during difficult times when you're unable to earn.
Typically sold alongside loans or credit cards, PPI is designed to cover payments for a limited period, often up to 12 months, making it a form of short-term insurance. You can pay for PPI on a monthly basis or as a lump sum, known as a 'Single Premium Policy'.
PPI is a broad term that encompasses various types of repayment insurance, each tailored to protect against specific risks.
What is Mortgage Protection Insurance?
Mortgage Payment Protection Insurance, or MPPI, ensures that your mortgage payments are covered if you’re unable to work due to illness, injury, or unemployment. While it falls under the broader category of PPI, MPPI is considered a distinct product purposefully made to safeguard your mortgage.
For a more in-depth understanding, check out our detailed guide on Mortgage Payment Protection Insurance.
How does Mortgage Payment Protection Insurance Work?
The payout from Mortgage Payment Protection Insurance depends on the type of coverage you select. You can choose how much you want your policy to pay out each month. While some may opt to cover just their mortgage repayments, certain providers allow you to add extra to help with bills and other expenses.
The maximum monthly benefit is usually capped, either by a fixed limit or as a percentage of your gross monthly income. If your MPPI claim is approved, you’ll need to wait between 1-6 months for the payout, known as the ‘deferred period’. That said, some providers offer ‘back to day one’ coverage, meaning your payments will be backdated to the date you submitted your claim once the deferred period ends.
What is the Difference Between Mortgage Protection Insurance and PPI?
While Mortgage Payment Protection Insurance is a type of Payment Protection Insurance, they are not the same product.
A key difference is that PPI typically makes payments directly to the lender or creditor, such as for loans or credit card debt, whereas MPPI pays directly to you, the policyholder, to help you cover your mortgage payments.
Both PPI and MPPI offer protection for a single form of debt repayment, but PPI covers credit card or loan repayments, while MPPI is specifically designed to protect your mortgage payments.
What are the Different Types of Mortgage Protection Insurance?
There are three main types of Mortgage Payment Protection Insurance, each covering different circumstances:
Unemployment-only policies: These provide coverage if you're unable to work due to redundancy.
Accident and sickness policies: These cover you if you're unable to work due to a serious illness or injury.
Comprehensive policies: These combine both unemployment and accident/sickness coverage, offering more complete protection.
Do You Need Mortgage Insurance?
Mortgage protection insurance isn't mandatory, but it can be vital if losing your income would make it hard to meet your mortgage repayments. This is particularly important if you're self-employed, ineligible for sick pay and redundancy packages, or lack sizable savings. MPPI can protect you from defaulting on your mortgage, thereby preventing the risk of losing your home.
Alternatives to Mortgage Protection Insurance
Income protection insurance: Offers regular payouts if you're unable to work due to illness or injury. Unlike MPPI, the payments can be used for any living expenses, not just your mortgage.
Critical illness cover: Pays out a lump sum if you're diagnosed with a serious illness that prevents you from working. This payout can be used to cover your mortgage or other financial needs.
Life insurance: Provides a lump sum payment to cover your mortgage if you pass away during the policy term, ensuring your family isn’t left with the financial burden.
How Much Does Mortgage Payment Protection Cost?
The cost of Mortgage Payment Protection Insurance depends on several personal factors, including your age, annual income, the size of your mortgage repayments, and your occupation. The price will also vary based on the type of policy you choose and the level of coverage you need. Other factors include how quickly you want coverage to begin after making a claim and how long you'd like the protection to last.
Is Mortgage Payment Protection Safe?
Yes, Mortgage Repayment Insurance is completely safe and highly recommended to protect you and your family if you're ever unable to make your mortgage payments.
Following past issues with mis-selling, both PPI and MPPI are now subject to strict regulations, ensuring transparency and preventing similar problems. This oversight allows you to purchase payment protection with confidence.
For a quick, personalised quote, try our Mortgage Payment Protection Insurance UK quote generator today!
