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What is Mortgage Payment Protection?

Tricia Christensen
Updated May 17, 2024
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Mortgage payment protection is a new type of insurance that has gained popularity in the UK. In the US, such insurance tends to be called mortgage insurance. Those who buy a home with less that 20% down may be required to purchase such insurance to get the necessary financing.

US mortgage payment protection tends to give a payout if one dies or becomes permanently disabled. It may protect a co-purchaser, such as a spouse or domestic partner, from assuming the full weight of a mortgage. It tends to be one of the most expensive forms of insurance to protect payment of one’s mortgage in the event of death or disability.

Most reputable insurance brokers recommend that instead of purchasing mortgage payment protection, one purchase instead higher amounts of life insurance and disability insurance. These amounts generally cost about half the rate of similar amounts of protection from mortgage payment protection. However, those older than 45, those in poor health, and smokers, may end up paying more for life and disability insurance. In these cases, mortgage insurance may be a better choice.

Most mortgage payment protection plans in the US do not offer coverage or payments of the mortgage if the policyholder should become unemployed. Since unemployment benefits are significantly lower than earned wages, they may not provide enough to make mortgage payments, and could cause one to lose his or her home.

In the UK, protection if one becomes unemployed is the primary reason people purchase mortgage payment protection. Costs are about .24% of the mortgage amount per month. Usually mortgage payment protection requires an unemployed beneficiary to register with an unemployment agency and prove that they are diligently seeking work. In most cases, there is a set term in which the mortgage payment protection will continue to pay the mortgage. Terms are generally either 12 or 24 months. Additional months may be purchased but will significantly raise price.

In addition to payment if one becomes unemployed, UK mortgage payment protection will also offer options such as payoff of the mortgage if one dies or becomes totally disabled. This may be of great help to a surviving partner, or to those who might inherit the property, as they will own the full property, not just the portion previously owned by the deceased owner.

Mortgage payment protection is frequently offered with fixed terms. One’s payments to the insurer will never go up. However, if the home value changes, and the owner decides to refinance, thus owing a larger amount, he or she may not get full coverage or repayment without changing his or her mortgage payment protection policy.

WiseGeek is dedicated to providing accurate and trustworthy information. We carefully select reputable sources and employ a rigorous fact-checking process to maintain the highest standards. To learn more about our commitment to accuracy, read our editorial process.
Tricia Christensen
By Tricia Christensen
With a Literature degree from Sonoma State University and years of experience as a WiseGeek contributor, Tricia Christensen is based in Northern California and brings a wealth of knowledge and passion to her writing. Her wide-ranging interests include reading, writing, medicine, art, film, history, politics, ethics, and religion, all of which she incorporates into her informative articles. Tricia is currently working on her first novel.
Discussion Comments
By sunshine31 — On May 23, 2011

@Comfyshoes -I just wanted to add that those that put less than 20% down are subjected to PMI or private mortgage insurance that is required by the bank in order to comply with the loan. This is different than the optional insurance available for loss of income.

I do think that mortgage protection insurance is better than buying life insurance in order to pay off the mortgage in case of your death. I think that it is more likely that you will lose your job or become disabled then if you die so the odds are more favorable to purchasing mortgage payment protection insurance. That is just my opinion.

By comfyshoes — On May 22, 2011

@Anon3974 - That is good to know. I recently bought a property and declined the income protection insurance because the mortgage was relatively small and I felt that I would be able to pay it off in a few years.

I do think that if you have a 30 year mortgage it is a good idea to get a mortgage payment protection quote because there are a lot of companies that offer this type of product and you want to get the best plan for you. It is always best to compare the mortgage payment protection plan rates before you decide. The peace of mind knowing that your mortgage will be covered in case you lose your job is worth it if you have a large mortgage.

By anon3974 — On Sep 26, 2007

There is now a new insurance policy available in the US which does pay consumers if they are UNEMPLOYED. The product has just been released and it's called the Mortgage Safety Plan. Benefits are paid directly to the insured if he is unemployed, disabled, hospitalized, or upon death. Benefit amounts are available up to $2000 per month, with a payout of up to 6 months, so long as the insured is unemployed.

Tricia Christensen
Tricia Christensen
With a Literature degree from Sonoma State University and years of experience as a WiseGeek contributor, Tricia...
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