Mortgage protection insurance

Mortgage protection insurance is a low-cost variation on income protection insurance, or salary continuance, but with limited features. It is designed specifically to cover your loan repayments if you become sick or injured and are unable to work. It is promoted as an alternative to using your savings, or re-drawing on your loan, to fund your ongoing mortgage repayments until you recover.

Mortgage protection cover is usually sold by bank staff or mortgage brokers when you take out a new loan. It is popular with credit providers because it helps to protect their loan repayments, as well as earning them an additional commission from the insurers.

While there are a number of different products on the market, with varying features, there are usually some common limitations to this type of insurance:

• Usually you receive cover to fund just your mortgage repayments if you fall ill or are injured. You will not usually be able to claim for any of your other living expenses, which are equally important.
• The benefit period will often be limited to just 2 years, so if you are disabled permanently or suffer a long term illness this type of insurance can leave you lacking.
• Not all mortgage protection insurance will cover you if you are unable to work in your 'own occupation'. This means that if you are deemed able to work in another occupation you may not be able to claim. This could be highly unsuitable, especially if your current income reflects your specific skills and experience and you couldn't earn as much doing something else.

For many people, income protection or salary continuance insurance can be a far better choice than mortgage protection, as it can provide a wider range of cover and provide for all your living expenses up to your chosen limit. Salary continuance insurance can be taken out to protect your income until age 65, which could be valuable if you suffer from a longer-term illness or injury.