Key Post The Difference between Mortgage Protection and Mortgage Repayment Protection

[LDFerguson]

I've seen countless threads over the years where people are getting confused with the difference between Mortgage Protection and Mortgage Repayment Protection. Given the similarity of the two names, it's easy to see why they would be confused, although in fact they are totally separate products.

So for the record...

Mortgage Protection
A.K.A. Decreasing Term Assurance, Decreasing Life Assurance etc.

This is a form of life assurance policy. It pays off your mortgage in the event of death. The amount of cover reduces on an ongoing basis in an attempt to mirror the reduction in the amount you owe on a repayment mortgage.

It can sometimes be bundled with optional covers, such as Specified Serious Illness cover, which will pay out a lump sum if you contract one of the listed serious illnesses.

But Mortgage Protection life assurance will not repay your mortgage if you are made redundant.

If your mortgage is interest-only, your lender may insist on Level Term Assurance cover, where the level of cover stays constant rather than decreasing. I'm told life assurance salespeople try to upsell this type of cover to people with repayment mortgages also, even though it is surplus to requirements and the reasons why one would do so are debatable at best.

Mortgage Repayment Protection
A.K.A. MRPP, Repayment Protection etc.

This will pay you an agreed monthly amount, usually for up to twelve months if you are out of work due to redundancy or illness. There's usually a waiting period before you get paid, typically four weeks and an exclusion period for certain events immediately after you start the policy, which varies from provider to provider.

Mortgage Repayment Protection will not pay off your mortgage if you die.




Mortgage Protection life assurance is compulsory for private family home mortgages with a few exceptions. Mortgage Repayment Protection is optional.

If anyone has any clarifications or corrections, please post them here. But please don't post queries about your own specific policy or opinions about the relative merits of a particular type of policy here - start a new thread. I'd like to keep this thread just as an explanation of the difference between these two oft-confused products.

 

[MugsGame]

Thanks, think this is very useful.

A.K.A. Decreasing Term Assurance, Decreasing Life Assurance etc.

Could this confuse people with fixed sum mortgage life assurance rather than declining benefit cover? I get the impression banks try to upsell the former, although only the latter is required. Do you know what proportion of people stick with the minimum cover?

Mortgage Protection life assurance is compulsory for private family home mortgages with a few exceptions. Mortgage Repayment Protection is optional.

Maybe add whitespace before this to show that you are now comparing the two products rather than discussing the last heading? Or move the setence on life assurance to the previous section?

 

[dewdrop]

Maybe add that Mortgage Protection Insurance becomes payable even if the Mortgage has been cleared.

 

[LDFerguson]

Thanks, think this is very useful.



Could this confuse people with fixed sum mortgage life assurance rather than declining benefit cover? I get the impression banks try to upsell the former, although only the latter is required. Do you know what proportion of people stick with the minimum cover?



Maybe add whitespace before this to show that you are now comparing the two products rather than discussing the last heading? Or move the setence on life assurance to the previous section?

Thanks - have made changes.

I don't have any statistics about the numbers of poeple who stick with the basic product although the "1, 2, 3 option" sales technique is well-known - offer a prospect three choices in ascending order of price and the majority will pick number 2.

 

[LDFerguson]

Maybe add that Mortgage Protection Insurance becomes payable even if the Mortgage has been cleared.

Sorry - do you mean that you continue to pay premiums even after you've repaid your mortgage? Or something else?