Arranging a mortgage is a massive commitment, and it is easy to see why many people are concerns what will happen in the future. If you don’t have the money to pay your mortgage each month, you run the risk of losing your family home. However, many issues or problems can arise which sees you lose your income. This is why many people look for a solution which provides them with protection in case they lose their job or are unable to generate income.

What is mortgage protection?

There is a range of solutions which are often referred to as “mortgage protection”, and these include Mortgage Payment Protection Insurance (MPPI) and Income Protection. It is possible to choose a policy which covers your payments in the event of you being unable to do so. It is also possible to choose a policy which replaces income if you were to become unemployed, suffer an accident or fall ill.

These policies provide you with cover if you cannot generate enough income to pay your mortgage, but it is also possible to take out life insurance. If the main income earner from the family dies, the family they leave behind may be unable to meet their mortgage payments. With life insurance in place, there is cover to pay the mortgage, allowing some semblance of normality for the family they left behind.

What are the different types of mortgage protection?

If you are unable to work because of an illness or an accident, income protection replaces an element of your income. It is also possible to arrange cover in the case of being made unemployed, but this is a more expensive policy.

With these policies, you can select between long-term and short-term options. A longer-term solution provides cover until retirement age while shorter-term solutions only pay out for a limited time-frame. Understandably, the shorter-term policy is more affordable.

MPPI covers mortgage repayments for a defined period up to two years when the policy holder loses their job, or suffers an accident or illness which leaves them unable to work.

There is also critical illness cover, which provides a lump sum if the policy holder suffers a stated serious medical condition. It is important to review the options because different companies include and exclude certain conditions, and policies often differ. Critical illness cover usually covers certain types and stages of strokes, cancer and heart attacks.

Must I take out mortgage protection?

No. It isn’t compulsory to take out mortgage protection, but it is important for mortgage holders to review their finances. Most of us don’t like to think about matters such as death or illness, but if they occur, there could be serious repercussions for the mortgage holder and their loved ones.

When researching mortgages and reviewing your budget, consider whether you need protection for your mortgage. This represents an additional cost to pay each month, but equally, if it is required, it may be money well spent.