Updated: December 17, 2021

Mortgage Redundancy Insurance

Unsure of the in's and out's of mortgage redundancy cover? Find out what the insurance is, how much it costs - and whether it is right for you.

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Pete Mugleston

Author: Pete Mugleston - Mortgage Expert

Updated: December 17, 2021

If you’re made redundant and can’t move to another job immediately, you may struggle to meet your monthly mortgage repayments. Mortgage payment protection insurance (MPPI) can help reduce your worries should this happen.

By following this guide you’ll have a better understanding of all the different options available, what each level of cover can provide and where to look for help and guidance.

What is mortgage redundancy cover?

Mortgage redundancy cover, or MPPI, is a type of insurance that will cover some, or all, of your mortgage repayments following redundancy. It’s tied to your mortgage, unlike other forms of income protection, where the cover can be used to pay for any of your bills or expenses. The payment will be made directly to you so you can continue paying off your mortgage.

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How does MPPI work?

You can purchase three kinds of MPPI:

  • Unemployment only: This protects your mortgage repayments if you are made redundant.
  • Accident and sickness only: This protects your mortgage repayments if you are injured or unwell to the point you can’t work.
  • Accident, sickness and unemployment: This combines the first two types, so your repayments are covered for redundancy plus accident or sickness.

For redundancy cover, you would need to make sure your policy includes unemployment protection. The cost of purchasing unemployment cover on its own will be lower than including accident and sickness.

How much does it cost?

Cost may also vary depending on:

  • Age
  • Mortgage repayments
  • Occupation

If you want to include accident and sickness insurance as well, desk-based jobs will be cheaper to cover than those with a greater risk. You could also choose a ‘back-to-day-one’ policy which backdates cover to your first day off work.

The average monthly premium is around £20 but depending on your circumstances could range from under £10 to just over £40. If you speak to a mortgage broker, they’ll be able to help you find a quote for MPPI that best suits your own personal circumstances.

How can mortgage redundancy cover help you?

In some cases, you may be able to claim up to 125% of your mortgage payments in the event of involuntary unemployment, which could be useful to cover bills and expenses. However, many policies have an upper payout limit of around £1,000 – £2,000 per month.

Your cover will probably include a waiting period after your unemployment date, during which time you’re not able to make a claim. This is usually between one and three months and most policies will only cover you for up to 12 months in total.

If you choose a ‘back-to-day-one’ policy, you’ll receive extra payments to cover the time since your first day of unemployment, but as these are backdated, it’s important to make sure you have enough savings to cover the waiting period.

How to get mortgage redundancy cover

If you’re looking to include redundancy cover, there’s a few options available to you:

Step 1.
Step 2.
Step 3.

Collect quotes from a range of providers before you apply for a mortgage, so you can select the best cover for you.

Alternatively, the smartest move you can make is to seek support from a mortgage broker. They will be able to help you sift through the different options, as their specialist knowledge of the different MPPI insurers on the market makes it easier for them to pinpoint the best deals for you. Get in touch with us to get matched with an expert in this area.

Apply for mortgage redundancy cover from your chosen lender if they offer this option. You’ll need to provide information about your employment, personal details such as age, your mortgage itself and some health details such as smoking status (if you’re including sickness cover). But keep in mind that taking your lender up on this without shopping around first could mean that you miss out on a potentially better deal elsewhere.

Are there any restrictions?

Yes, there can be. You may not be able to get cover if you’re in part-time, self-employed or temporary employment. However, there are other types of insurance, such as income protection, that might be available.

If redundancies have already been announced at your place of work at the time of purchase, you may not be able to claim on your cover, so it’s best to buy this insurance long before you’ll need it.

Additionally, if you are purchasing accident and sickness insurance with unemployment cover, you may not be accepted if you have pre-existing conditions.

Other circumstances where MPPI wouldn’t pay out include:

  • Voluntary redundancy
  • If you resign of your own volition
  • If you’re sacked from your job due to misconduct

In light of the COVID-19 pandemic, the number of insurers offering redundancy has dwindled. Rather than spending time searching for a provider, get in touch with us to speak to a broker who will know which insurers are offering the right kind of cover for you.

What are the alternatives?

There are several kinds of insurance that could help you cover your mortgage payments if you’re unable to meet the costs.

Bear in mind that these will be more suitable for covering sickness or even death, rather than redundancy:

Income protection
Critical illness cover
Life Insurance

Income protection insurance will pay out a portion of your income if you are unable to work. You can seek short or long-term cover which would cover different circumstances: short-term if you have an injury or illness that may resolve, for example, or long-term if you’ll potentially be off work up to retirement age. Unlike MPPI, you can use the payments for any expenses.

Critical illness cover will pay out a lump sum if you develop one of the conditions specified in your policy. This money can then be used to pay healthcare costs or cover your day-to-day expenses.

Mortgage life insurance pays a lump sum if you die so your family can pay off your mortgage and won’t be saddled with the debt.

Speak to a broker about mortgage redundancy cover

Working with a mortgage broker can make it easier and cheaper to find the right cover. A broker who specialises in mortgage redundancy cover will be able to discuss your personal circumstances and run through the options with you.

With access to the entire market, they will have access to offers you wouldn’t be able to find yourself. We can match you with a vetted broker, whose specialist expertise in this area will boost your chances of finding the best deal.  Give us a call today on 0808 189 0463 or make an enquiry and we’ll set up a free, no-obligation chat between you and your ideal advisor today.

FAQs

Are there any alternatives to insurance?

If mortgage redundancy cover isn’t right for you, or you’ve already been made redundant and you’re looking for support, you might be able to claim help from the government such as Jobseeker’s Allowance or the Support for Mortgage Interest scheme. Be aware that payments may be lower than you’d be able to access through MPPI.

Is Mortgage Payment Protection Insurance (MPPI) the same as Payment Protection Insurance (PPI)?

MPPI and PPI are both forms of payment protection that can only be used for one debt. PPI can apply to other forms of debt outside a mortgage, and payments will be made to your creditor. MPPI must apply to a mortgage and the money will come straight to you.

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We know everyone's circumstances are different, that's why we work with mortgage brokers who are experts in all different mortgage subjects. Ask us a question and we'll get the best expert to help.

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Pete Mugleston

Pete Mugleston

Mortgage Expert

About the author

Pete, an expert in all things mortgages, cut his teeth right in the middle of the credit crunch. With plenty of people needing help and few mortgage providers lending, Pete found great success in going the extra mile to find mortgages for people whom many others considered lost causes. The experience he gained, coupled with his love of helping people reach their goals, led him to establish Online Mortgage Advisor, with one clear vision – to help as many customers as possible get the right advice, regardless of need or background.

Pete’s presence in the industry as the ‘go-to’ for specialist finance continues to grow, and he is regularly cited in and writes for both local and national press, as well as trade publications, with a regular column in Mortgage Introducer and being the exclusive mortgage expert for LOVEMoney. Pete also writes for OMA of course!

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FCA Disclaimer

*Based on our research, the content contained in this article is accurate as of the most recent time of writing. Lender criteria and policies change regularly so speak to one of the advisors we work with to confirm the most accurate up to date information. The information on the site is not tailored advice to each individual reader, and as such does not constitute financial advice. All advisors working with us are fully qualified to provide mortgage advice and work only for firms that are authorised and regulated by the Financial Conduct Authority. They will offer any advice specific to you and your needs.

Some types of buy to let mortgages are not regulated by the FCA. Think carefully before securing other debts against your home. As a mortgage is secured against your home, it may be repossessed if you do not keep up with repayments on your mortgage. Equity released from your home will also be secured against it.

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