What is mortgage payment protection insurance?

Mortgage Payment Protection Insurance (MPPI) is often referred to as Accident, Sickness & Redundancy/ Unemployment cover (or ASU, as it is known in the trade). It is a short-term income protection policy designed to replace a proportion (usually up to 65%) of your income in the event that you are unable to work, and no longer receiving income. It pays you a monthly benefit for up to 12 or 24 months, if you can’t work due to an accident, sickness and/or involuntary unemployment, once you have passed a pre-defined waiting (or deferred) period.

You can usually ‘defer’ the receipt of the monthly benefit to tie-in with when your employer stops paying you. The longer this deferred period, the cheaper the policy becomes. Typically, you would have the choice of 30, 60, 90 or 180 days from the onset of illness, and could select a different deferment for the unemployment cover if desired.

These monthly payments will help you to meet your on-going mortgage payments, associated insurances, and living expenses, in the short-term to help ensure that you don’t fall behind with your monthly commitments.

For longer term cover, you will need to look at Income Protection – which provides cover right up to your retirement age; or the end of the mortgage term, in the event of prolonged ill-health.

Top tip: The differences between these types of policies is hard to comprehend without extensive and time-consuming research.

As always, we will be happy to advise on what is the most appropriate cover for your needs, so please call one of our Protection Advisers on 01271 346123 for more information.

There are other providers of Payment Protection Insurance [Short-Term Income Protection] and other products designed to protect you against loss of income. For impartial information about insurance, please visit the website at www.moneyadviceservice.org.uk

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