Would payment protection pay out for you?

This page is about mortgage payment protection insurance, the cover that pays your mortgage for a limited time if you cannot work. It sets out the checks that decide whether a claim would actually be paid.

Why these checks matter

Payment protection was often sold in the same conversation as the mortgage offer, with the paperwork for both signed within minutes of each other. The policy was priced and recommended before anyone checked whether the person buying it could actually claim on it.

The regulator's review of this kind of selling found that the questions which decide whether a policy pays out were the ones most often left unasked: whether the buyer was employed enough hours to qualify, whether they were self-employed and so excluded from parts of the cover, whether a health condition already existed, whether a redundancy was already on the cards. A policy can be entirely genuine and still not help you, if your circumstances don't match the ones it was written for.

What that means when you're looking at your own policy

A policy document doesn't tell you, on its own, whether it would pay out for your situation. It tells you the rules. Reading those rules against your own employment, health and existing cover is the step that was skipped before, and it's the step worth doing now, whether you're deciding whether to take the cover or checking a policy you already hold.

Before anything else

Are you actually eligible for this cover?

These conditions decide whether a claim could ever be paid, whatever happens to you later. Check them against your own paperwork before you look at exclusions or anything else.

  • Employment status at the start of the policy

    Policies are usually written for employed people or self-employed people separately, and a mismatch between your actual status and the one on the document can mean a claim is refused.

  • Hours worked each week

    Most policies set a minimum number of hours you need to work to qualify, so check the figure in your document against your actual contract or rota.

  • Age when you took out the policy

    Insurers set an age range for starting cover, and a policy sold outside that range may never have been valid.

  • Age when the policy stops paying

    Cover usually ends at a set age even if your mortgage runs on beyond it, so check that end age against how long you'll still owe the mortgage.

  • How long you'd need to have been in the job

    Some policies require a minimum period of continuous employment before cover starts, which matters if you've recently changed jobs or gone self-employed.

Meeting these conditions means a claim could be considered, not that it would be paid. The next checks cover what else could still rule a claim out.

Eligibility checks

Which parts of the cover would actually apply to you

Mortgage payment protection insurance (MPPI) usually bundles together cover for accidents, sickness and unemployment, often shown as ASU cover on the document. Not all three apply to everyone who holds the policy, so it's worth checking which parts actually cover your situation before you rely on any of them.

  • Your employment status

    Unemployment cover normally applies only if you're an employee. If you're self-employed, that part of the policy won't pay out, even though you're still paying for it.

  • The hours you work each week

    Policies often set a minimum number of weekly hours to qualify for unemployment or sickness cover. Check the wording against your own contracted hours.

  • The type of contract you're on

    Fixed-term, temporary or zero-hours contracts are commonly excluded from unemployment cover, even where the reader works full-time weeks in practice.

  • Your age against the policy's age limits

    Cover can stop, or may never have started, outside an age range set out in the policy. Check both the start and end of that range against your own age now and at renewal.

  • Whether redundancy was already on the cards

    If you knew redundancy was being considered before the policy began, a claim made on those grounds is unlikely to be paid.

  • Which of accident, sickness and unemployment you're actually covered for

    Some policies pay out for only one or two of the three, despite being sold under one combined name. Check which triggers apply to you.

Each of these needs checking against your own policy document and your own circumstances; a tick on one point doesn't tell you anything about the others.

Significant exclusions

Exclusions that decide whether a claim is paid

Each of these sits in the policy document somewhere, usually in a section headed 'exclusions' or 'conditions'. Find the equivalent wording in yours before you decide anything.

  • Initial exclusion period

    This is the gap between buying the policy and the earliest date you can make a claim; check your document for the length, because a claim made inside it will not be paid.

  • Pre-existing conditions

    Most policies will not pay out for a condition you already had, or had symptoms of, before you took out the cover.

  • Redundancy you already know about

    If you knew redundancy was likely or announced before you bought the policy, a claim arising from it is usually excluded.

  • Conditions covered only under a specialist

    Some policies pay out on sickness only where the condition is being treated by a consultant or specialist, not by a GP alone.

  • How long the policy pays per claim

    Cover runs for a set number of months per claim, after which the payments stop even if you are still unable to work.

  • Whether the insurer can change your premium or cover after sale

    The regulator found in 2009 that many payment protection contracts let the insurer change the terms in ways that could be unfair; check your document for a variation clause and what it allows the insurer to alter.

A policy can satisfy every one of these checks and still turn out not to suit your situation. Where the wording is unclear, ask the insurer to point to the exact clause before you sign.

Before you decide

What you may already have in place

Before taking on a new policy, it's worth working out what would already pay out if you couldn't work. Some of this cover might make new payment protection unnecessary, or show you a gap it wouldn't fill.

  • Employer sick pay

    Check your contract or staff handbook for how long your employer would keep paying you if you were off sick, and at what rate.

  • An existing income protection policy

    Check whether you already hold a separate income protection policy, since its claim triggers and payment period are different from mortgage payment protection.

  • Savings you could draw on

    Work out how many months of mortgage payments your savings would cover before you'd need a policy to start paying.

  • Other insurance taken out alongside a loan or mortgage

    Look through old paperwork for critical illness or accident cover sold with a previous mortgage, loan or credit card, which may still be running.

  • Redundancy pay or notice period

    Check your contract for any redundancy or notice pay, which would cover you before unemployment cover could begin.

  • State support you're already receiving

    If you're already on Universal Credit or income-based ESA, check how this affects when Support for Mortgage Interest could start.

State support and lender options, including Support for Mortgage Interest and forbearance, are covered separately in the guide to alternatives and existing cover.

Questions to ask before you sign

Once you've worked through the checks on this page, the answers you're missing are the ones to put to the adviser or insurer directly. Ask them exactly as below, and get the answer in writing before you sign.

Eligibility

  • "Am I eligible for this cover given my employment status, my hours worked and my age?"
  • "Which parts of this policy would not pay out for me?"
  • "If I'm self-employed, does the unemployment cover apply to me at all?"

Exclusions

  • "What is the initial exclusion period on this policy, and when does it start?"
  • "Are any of my current or past medical conditions excluded as pre-existing?"
  • "Is there any redundancy I already know about that this policy would treat as excluded?"
  • "Are there conditions this policy only covers while I'm under the care of a specialist?"

Claim limits and changes

  • "How long would this policy pay out for a single claim?"
  • "Can you change my premium or the cover itself after I've taken the policy out?"
  • "If you can change it, what would trigger that and how would I be told?"

Cover you already have

  • "Does my employer's sick pay, or any income protection or savings I already have, affect whether I need this policy?"
  • "Would I be paying for cover that duplicates something I already hold?"

Write down the answers next to each question. If any answer is vague or conditional, ask for it again in plain terms before you decide.

This page explains how cover works and what to check. The choice of whether to take out, keep or cancel a policy is yours, made with the insurer or a regulated adviser.