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Mortgage redundancy cover

Written By:
Myles Robinson - Expert Finance Advisor

Posted: Feb 13, 2023

Mortgage redundancy cover

Many customers contact us to ask if their mortgage protection redundancy cover. The answer is yes. However, the details of your policy and your circumstances will determine what cover you need.

Mortgage payment protection insurance (MPPI), also known as mortgage redundancy cover, insurance to protect your mortgage, or mortgage protection, can help you pay your monthly mortgage repayments if you lose your job or are unable to work.

A mortgage protection policy can be a good option if you are concerned that you could face redundancy following your mortgage application.

Call us today for more information or submit an enquiry and we’ll forward your query to a specialist mortgage broker. This guide will provide all the information you need about mortgage payment protection redundancy insurance.

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What types of mortgage insurance policies are available?

If you lose your job, there are three types of redundancy insurance options:

Mortgage payment protection insurance (MPPI).

This type of insurance may have been purchased along with your mortgage. This insurance typically pays your mortgage repayments within three months of your earnings stopping. It can also continue to pay for as long as 12 months.

Payment protection insurance (PPI).

Sometimes, this is also known as Accident, Sickness and Unemployment cover (ASU). This insurance might be purchased with a credit card or personal loan. This insurance helps you keep your loan payments on track by paying a fixed amount for 12 to 24 months. Typically, payments begin three months after you stop earning.

Short-term Income Protection Insurance (STIP).

This insurance replaces a portion of your income for a period (usually 12 to 24 months). This insurance is not meant to be confused with income protection policies. These usually don’t pay out if your job is lost.

You might not have known that you had this cover in the past because of how payment protection policies were sold.

Ask your lender if your mortgage, loan, or credit card is insured. Contact us today for mortgage advice.


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What would you need to be covered?

Even if you have been paying premiums for years, some policies will only pay for a year.

  • Payment insurance (or mortgage payment security insurance) covers only your mortgage repayments and not your income. Some mortgage payment protection policies provide additional funds to cover other bills.
  • Short-term income protection insurance pays a percentage of your income, usually 50% or 60%, rather than being tied with debt repayments.

Many policies do not pay immediately. There is almost always a delay of three months.

You should file a claim as soon you lose your job.

This type of insurance is not recommended.

Redundancy is already in the cards

Are there rumours of job loss or redundancies in your company? If so, it is not worth taking out a policy because you won’t have the ability to claim.

This is also true for voluntary redundancy. In most cases, the insurer will not pay out.

Before you buy a policy, make sure to read the terms and conditions.

Part-time work, self-employed or temporary contracts are all options.

Does this apply to you? If so, you should check that your payment protection policy doesn’t cover you.


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When you should consider buying mortgage redundancy cover

  • You are in a job with a medium-to-high likelihood of being fired, but it is more than three to six months away.
  • You will unlikely find another job in three months after your redundancy.
  • You are happy to know that the policy will only cover your payments for 12 months after a waiting period of one-three months.
  • All exclusions are understood.
  • You are willing to shop around to find the best deal. You must never purchase it from your mortgage or loan provider automatically.

What is included in the mortgage protection insurance redundancy cover?

There are many types of MPPI, so the type you choose will determine what cover is available. There are three types: “Unemployment only”, “accidents and sickness only” or “Accidents, sickness and unemployment”.

“Unemployment only” will not provide you with mortgage protection in case of your job loss. “Accident and illness” will cover you for injuries or long-term illnesses that prevent you from working. You will be covered for any combination of the three: accident, sickness, and unemployment.

If you are looking for mortgage protection in redundancy, then opt for “unemployment only”.


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What is the coverage for mortgage protection is voluntary redundancy?

Although policies may vary from provider to provider, most insurers won’t pay out if you choose voluntary redundancy. This is because these payouts are often much higher than those for involuntary redundancies.

Before signing up for mortgage redundancy insurance policy, read the terms and conditions. This will help you determine if you are eligible for a payout.

What is the cost of mortgage protection with redundancy?

Depending on the type of coverage you select, your MPPI policy’s price will vary. “Accident, sickness, and unemployment” will be more costly than “accident and injuries only” or “unemployment insurance alone”.

Other factors, such as your age and ability to pay your mortgage, can also play a part.

Contact us to find out how much mortgage protection insurance for redundancy will cost you monthly.

The advisor will then contact you to provide accurate quotes tailored to your specific circumstances. We have a few mortgage providers lending who we will match you with.


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What is the payout from my mortgage cover if I am made redundant?

The type of cover you have will determine the amount your insurer will pay. As a contribution to costs like energy bills, council tax, and so on, most providers will let you claim up to 125% of your mortgage.

There are limits. Most MPPI policies do not pay more than £2,000 monthly or 65% of your monthly income.

Although some policies only cover one year, the maximum you can expect your payments covered for is two years. Redundancy protection may not be required if you are a prudent saver with emergency funds.

What time will my mortgage protection policy pay?

Every MPPI policy has an excess period. You should have the option of adding “back to day one” cover to your MPPI policy.

The excess period refers to the time you must wait before receiving your first payment. It typically takes between 30 and 90 days. If you have a 30-day excess, your monthly payments will begin 30 days after you submit your claim.

Your payments will be backdated by “Back to Day One” policies starting from when you purchased the policy. A “back-to-day one” policy with a 60-day excess period would mean you receive two monthly payments.

To ensure that you are covered in the event of a downturn, it is a good idea to have at least two months’ worth of mortgage payments saved.


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What providers offer mortgage protection for redundancy?

A variety of insurance companies offer MPPI. These include high-street banks, building societies, and niche independent providers.

Mortgage redundancy cover from Halifax

Both Lloyds Bank and Halifax offer mortgage redundancy cover, but this is limited to involuntary work.

Talk to an expert about insurance that protects your mortgage against redundancy

Do you have questions about redundancy cover on a mortgage? Or do you need advice about whether it is a good product?

Our team includes whole-of-market specialists, including experts in mortgage payment protection insurance products. They will be able to provide advice tailored to your needs and help you find the best providers and quotes on the market.

Send us an enquiry, or contact us today. There is no fee, and no obligation.


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