What is mortgage payment protection insurance?
Payment protection insurance basically covers your mortgage instalments in either of the following cases:
- Unemployment: provided you had a permanent contract with your employer.
- Temporary incapacity: as a result of illness or accident, if you have a temporary contract with your employer or are a sole-trader or civil servant.
The important thing to remember is that the coverages for unemployment or temporary incapacity are alternatives, i.e. you can only use one or the other. The policy must clearly state all the conditions, and these will depend on your employment situation at the time of the claim.
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How does mortgage payment protection insurance work?
If you make a claim because you are declared temporarily unfit for work or you become officially unemployed, the underwriter will pay your outstanding instalments to the bank that granted your mortgage, as per the initial limits and conditions specified in your policy.
What factors are taken into account when taking out mortgage payment insurance?
Several factors are taken into account when you take out payment protection insurance, but the most important ones are as follows:
- The insured party must be the mortgage holder. If there are two holders, either the policy can be taken out in both names or two separate policies can be taken out, one for each holder.
- Outstanding amount or principal.
- Monthly instalment.
- Interest rate and mortgage type.
- Time to maturity or duration of the mortgage.
- Insured's age, which must be between 18 and 60.
- Insured's current state of health.
- Insured's current employment situation. This refers to having a paid employment, civil servant, professional or business relationship and being registered with one of the social security schemes.
What coverage does mortgage payment insurance provide?
- Unemployment: your payment protection insurance will pay all your mortgage instalments for 24 months, provided you had a permanent contract with your employer.
- Temporary incapacity: if you have an accident or illness that makes you unfit for work, your payment protection insurance will guarantee the payment of your mortgage instalments for up to 24 months, provided that you have a temporary contract with your employer or are a sole-trader or civil servant.