What is Mortgage Payment Protection Insurance?
Mortgage Payment Protection Insurance (MPPI) is a type of insurance designed to cover your mortgage repayments for a limited period if you're unable to work due to accident, sickness, or involuntary unemployment. It's intended to buy you time and financial breathing room while you recover, find new work, or otherwise get back on your feet, rather than providing indefinite cover.
What MPPI typically covers
Most MPPI policies pay out a monthly benefit — usually enough to cover your mortgage payment, and sometimes a bit more towards associated household costs — if you're off work due to a covered accident or illness, or if you're made involuntarily redundant. Cover is generally paid for a defined maximum period per claim, commonly somewhere in the range of 12 to 24 months, after which the payments stop even if you're still unable to work or find employment. This makes it fundamentally different from a permanent income replacement product.
Typical exclusions and waiting periods
Like most insurance, MPPI comes with conditions that are important to read carefully before buying:
- Pre-existing conditions: most policies exclude claims relating to a medical condition you already had, or knew about, before taking out the policy.
- Voluntary unemployment: if you resign, or unemployment cover doesn't apply if you were already aware redundancy was likely when you took out the policy.
- Self-employment restrictions: unemployment cover in particular is often unavailable, or heavily restricted, for self-employed people, since "redundancy" doesn't apply in the same way.
- Waiting (deferred) periods: most policies don't pay out immediately — there's typically a deferred period of 30, 60 or 90 days after the claim event before payments start, meaning you need to be able to cover payments yourself during that gap.
- Maximum claim periods: as noted, payments usually stop after a set number of months per claim, even if your circumstances haven't changed.
MPPI vs income protection insurance
| Feature | MPPI | Income protection insurance |
|---|---|---|
| What it covers | Mortgage payment (and sometimes related costs) only | A proportion of your overall income, for broader use |
| Typical payout duration | Limited, e.g. 12-24 months per claim | Can pay out until retirement age for long-term illness, depending on policy |
| Unemployment cover | Often included | Usually not included; typically illness/injury only |
| Typical cost | Generally lower | Generally higher, reflecting broader and longer cover |
Income protection insurance tends to offer more robust, longer-term financial protection against illness or injury (though it usually doesn't cover redundancy), while MPPI is narrower in scope but can be cheaper and specifically targeted at protecting your home.
Weighing it against sick pay and savings
Before buying MPPI, it's worth honestly assessing what protection you already have. Check your employer's sick pay policy — some employers offer generous contractual sick pay for months, which may make MPPI less urgent, at least for illness-related cover, though it won't help with redundancy. Consider also how large your emergency savings fund is: a well-stocked emergency fund covering three to six months of essential expenses can serve a similar purpose to MPPI's deferred-period-plus-limited-cover structure, without ongoing premiums, though it depletes rather than replenishes itself with each use, unlike an active insurance policy.
When MPPI is worth considering
MPPI tends to make most sense for: households with little in the way of savings buffer; those whose employer offers little or no contractual sick pay; the self-employed (for the illness/accident element, since unemployment cover is often unavailable to them); and anyone who would find a job loss or serious illness genuinely threatening to their ability to keep their home. It's less compelling for those with strong employer benefits, a substantial emergency fund, or overlapping cover through another policy (always check whether you already have some payment protection bundled with an existing insurance product before buying a new one, to avoid paying twice for similar cover).
Key takeaways
- MPPI covers mortgage payments for a limited period, typically 12-24 months, if you can't work due to accident, sickness or involuntary unemployment.
- Policies come with exclusions (pre-existing conditions, voluntary job loss) and a waiting period before payments start.
- Income protection insurance offers broader, often longer-term cover for illness or injury, but usually doesn't cover redundancy.
- Check existing employer sick pay and any current insurance cover before buying, to avoid unnecessary overlap.
- A solid emergency fund can substitute for or complement MPPI, depending on your job security and existing benefits.