Taking out a mortgage is an expensive business.

By the time you’ve considered your monthly mortgage payments, buildings and contents insurance and life cover, there’s often not much spare cash left for mortgage protection insurance.

However, what would happen to your home if you couldn’t work due to an accident, sickness or unemployment? Mortgage protection insurance can help you protect your income in these situations although it is estimated that only a quarter of households in the UK have this cover.

Our guide looks at what mortgage protection insurance is and how it can benefit you.

What is mortgage protection insurance?

Mortgage protection insurance is designed to help you to continue paying your mortgage in the event that you have an accident, you fall ill or you become unemployed. Some insurance contracts just cover accident, sickness or unemployment whilst other policies cover all these options.

You can generally tailor a policy to suit you, including:

• Amount of cover – Most mortgage protection insurance policies are designed to cover your mortgage payment plus a small additional amount to cover related payments such as insurance
• Benefit period – You can choose the length of time that you are covered for (for example 1 year, 2 years etc). The longer the cover, the more expensive your premiums will be
• Excess period – Most mortgage protection insurance plans have an excess period (a period excluded from the claims payment). For example, if you choose a 30 day excess period, the insurance wouldn’t start to pay out until you had been off work through accident, sickness or unemployment until 30 days had elapsed

Mortgage protection insurance policies almost always have an initial exclusion period at the start of the policy. This means that you cannot normally make a claim in the first 30, 60 or 90 days of taking out the insurance.

The benefits of mortgage protection insurance

The main benefit of mortgage protection insurance is that you will receive a monthly amount to help you pay your mortgage and associated bills if you’re in an accident, fall ill or are made unemployed. State support in these eventualities is limited and so you benefit from the peace of mind of knowing that you can remain in your home even if your income has fallen drastically.

You can also tailor a mortgage protection insurance policy to your specific needs depending on whether you want to cover accident, sickness, unemployment or a combination of risks.

Choosing mortgage protection insurance

If you’re looking to buy mortgage protection insurance, the logical place to begin is with your mortgage provider. Indeed, your mortgage advisor may have provided you with quotations or information about their own mortgage protection insurance scheme.

However, you are not obliged to buy your mortgage protection insurance from your mortgage provider; indeed you can often benefit from a cheaper or more comprehensive policy by shopping around. You should research the various policies available online as there are approaching 100 different contracts in the UK offering different benefits at different prices.

The terms and conditions under which you can claim differ with every policy, so make sure that you check them carefully before you buy.