Mortgage Protection Insurance

No, mortgage protection isn’t the same as life insurance.

Life insurance is a type of cover that pays out a lump sum to your beneficiaries upon your death. However, it doesn’t cover redundancy and, unless you add critical illness cover to your policy, it won’t pay out if you were to become unwell.

Related guide: Do you need life insurance to get a mortgage?

No, mortgage protection isn’t the same as critical illness cover.

Critical illness cover is a type of insurance that provides a tax-free payout should you be diagnosed with any illness listed in your policy (which can include certain types of cancers, heart attacks and kidney failure). 

Unlike mortgage protection, this payout can be used to cover other expenses – not just your mortgage repayments.

Before looking into options for critical illness cover, be sure to check whether this is already covered as part of your life insurance policy.

No, mortgage protection isn’t the same as payment protection insurance.

Payment protection insurance (PPI) is another type of income protection that covers the cost of monthly debt repayments for products such as credit cards and loans.

While the claimant will receive the payout from their mortgage protection policy, PPI is paid direct to the lender.

Mortgage protection differs from mortgage life insurance in that it pays out a set amount each month to cover the cost of mortgage repayments if you were to lose your job or suffer a serious health problem.

By contrast, mortgage life insurance is usually paid out as a lump sum when you die and can be used by your dependants to pay off any remaining mortgage debt. This type of policy is also sometimes referred to as ‘decreasing life insurance’ because, if you have a repayment mortgage, the amount paid out will steadily reduce as your debt lessens over time.

However, if yours is an interest-only mortgage, you’ll need a level term insurance policy instead. This is as your repayments only cover the interest accrued and don’t reduce your overall debt.

When buying mortgage protection insurance with a pre-existing medical condition, be sure to carefully check policies for any exclusions.

This is because some won’t cover pre-existing conditions, while others may provide cover subject to a strict set of criteria. For instance, you may be unable to make a claim if a pre-existing condition were to recur within a given period of taking out the policy.

Yes, your job may affect how much you pay for mortgage protection, as this is taken into consideration when calculating the cost of your premiums (alongside age, annual income and monthly mortgage repayments).

Those in occupations which present a higher risk of injury (such as manual labourers) may find their premiums are more expensive compared to those in lower-risk lines of work.

Yes, you can get mortgage protection if you’re self-employed.

In fact, this type of insurance may be particularly attractive to self-employed individuals who lack access to employee benefits such as sick pay and are concerned about their ability to meet mortgage repayments if they were to become ill or injured.

However, it should be noted some insurers will impose restrictions on the level or coverage self-employed people can receive; many, for instance, won’t accept claims for unemployment if you’re self-employed.

Therefore, it’s important to carefully check the terms of a policy before taking out the insurance.

Yes – most mortgage protection policies come with a 30-day cancellation period (also known as a ‘cooling off period’) unless the term is for less than six months or if you bought the insurance face-to-face from a broker.  

If you change your mind during this period, you can typically cancel the policy and receive a refund of any premiums paid. However, you may still be charged if you’ve been covered for a certain number of days or if you’ve made a claim on the policy before cancelling.

Outside of the cooling off period, there’s no automatic right to cancellation, so you may find yourself locked into your mortgage protection policy for the duration of the contract. While some insurers may allow you to walk away from the contract, they’re within their rights to charge cancellation fees and they may not refund any premiums paid.

If you’re considering cancelling your mortgage protection policy, it may therefore be worth speaking to your insurance provider to see what options are available.