There are two main types of mortgage protection insurance on the market. The first would enable you to continue to meet your mortgage payments if you should unexpectedly lose your income through accident, sickness or unemployment, and this is known as mortgage payment protection or Accident Sickness or Unemployment cover (ASU). The second type of mortgage protection insurance would pay off your mortgage balance in the event of your death, and this is known as decreasing term insurance. In this second case, as the name would suggest, your mortgage protection insurance would decrease year on year as you gradually pay off your mortgage balance.
Mortgage protection insurance for your day-to-day payments (ASU cover) would typically pay out for 12 months following your loss of income, to give you the time to make alternative funding arrangements. Not only would this type of mortgage protection insurance safeguard your finances, but it would also preserve your credit rating. If you miss mortgage payments, this is logged on your credit history report, meaning that if you ever try to borrow in the future, other lenders are more reluctant to lend to you. The mortgage protection insurance that would pay off your remaining balance in case of death can be taken out alongside a critical illness policy, meaning that if you were unfortunate enough to develop a critical illness (specified within the policy), your mortgage balance could be paid off when you were no longer able to work.