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The House Hop Guide to Mortgages

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Protect Yourself With Insurance

We've already mentioned compulsory insurance products (life assurance, buildings insurance and contents insurance) and the importance of shopping around to get the best deal.

In addition, you may want to consider some sort of insurance to protect you in case you are unable to work and can't keep up your mortgage payments. This could be in the form of mortgage payment protection insurance, income protection insurance or critical illness cover.

While such insurance does provide peace of mind it can be expensive. Therefore, if you decide to get it it's important to shop around for a good deal.

You should seek independent advice from a "whole of market" (ie, they are not limited to specific providers) financial advisor to ensure that whatever policy you choose is the most suitable.

Mortgage Payment Protection Insurance (MPPI)

MPPI is designed to cover your mortgage payments in the event of accident, sickness or unemployment — hence it is also known as Accident, Sickness and Unemployment cover.

Bear in mind that most policies only pay out for a year. If you have savings that would cover you for this long MPPI may not be necessary for you.

If you would get a large payout in the event of being made redundant then you might consider only getting the accident and sickness part of the insurance. Conversely, if your work provides good accident and sick pay cover you might look only at redundancy insurance.

Income Protection Insurance

Income protection insurance, also known as permanent health insurance, covers you in the event that you are unable to work for a prolonged period of time due to sickness.

Terms vary, but typically you will be covered up to your retirement age for around 50% of your income, plus any state benefits you may receive.

Critical Illness Cover

Critical illness cover provides payment protection in the event that you are diagnosed with a critical illness. The list of critical illnesses varies according to the insurer, but must include cancer, heart attack and stroke.