Home in on the best Mortgage Repayment Protection Insurance cover

When you’ve just bought a house and forked out for surveys, legal fees and stamp duty, it’s tempting to stop thinking about the duller aspects of home ownership, like mortgage protection insurance and blow the budget on paint and a new sofa.

But protecting your mortgage in case you can’t work is something you can’t afford to ignore, because you never know what life has in store. Somebody has a heart attach every two minutes in the UK and one in three of us will get cancer at some point in our lives, so none of us are invincible.

So how do you go about it protection your mortgage payments? On the surface, mortgage protection insurance looks simple. Your lender will more than likely offer you a mortgage protection insurance policy, also known as accident, sickness and unemployment cover. It’s a one-size-fits-all policy that doesn’t take account of your age, gender or occupation, and it will pay your mortgage and its associated costs, such as home insurance, for 12 months if you lose your job, suffer an illness or accident that stops you working.

But there’s nothing simple about mortgage protection insurance. To start with, your lender may not offer the best mortgage protection insurance cover. An investigation by online broker Rhinoinsurance.co.uk revealed the average cost of mortgage protection insurance from lenders is £6 a month for £100 of benefit, but you can buy mortgage protection insurance for almost half this if you shop around.

More staggering still, the research revealed that lenders are failing to provide key information about mortgage protection insurance policies. In a mystery shop of 25 major mortgage lenders, it claimed that only NatWest asked buyers about their medical history and mentioned that they would not be covered under mortgage protection insurance for any conditions they already had.

If you choose mortgage protection insurance, compare exclusions on policies and look for plans that offer ‘back to day one cover’. Mortgage protection insurance policies won’t pay out until you have been off work for 30 days. But mortgage protection insurances that offer ‘back to day one cover’ will backdate your payments to the day you left work. Also check what benefits you have from your employer. You can buy each component of mortgage protection insurance separately from some providers, so if you already have accident or sickness cover from your employer, you could simply opt for the unemployment cover.

However, even at the best price, mortgage protection insurance may not be the right type of insurance for you. The downside is that the mortgage protection insurance cover isn’t permanent, as it usually only pays out for one year. And because you are underwritten at the point of claim, not point of application, you may not be 100% sure your claim will be paid at all.

In addition, one or more components of the mortgage protection insurance may simply be unsuitable. People with generous sick pay from the employer, for example, might not need accident and sickness cover, unemployment cover can’t be used by a self-employed person, while exclusions could render sickness cover useless to someone who is already in poor health.