Mortgage payment protection insurance (MPPI) is a type of policy that homeowners take out to ensure that they will be able to keep up with their mortgage repayments through the course of the loan.

Such policies mean that if a mortgage holder should fall ill or lose their job, the insurance policy will make their repayments for them.

This prevents the homeowner facing a situation in which they would be unable to meet their mortgage repayments and therefore would face having their property repossessed by the lender.

While taking out a MPPI is not compulsory by law, according to research published by the Association of British Insurers in 2006, around 20 per cent of homeowners now have this type of policy.

Why take out MPPI?

ThisisMoney.co.uk points out that state benefits for homeowners who can no longer meet their mortgage repayments, due to illness or unemployment, are limited.

People in this situation are means tested before they can receive any help and are expected to use up any savings they might have.

Furthermore, the money advice website notes that government payouts can take as long as nine months to arrive in recipients' bank accounts.

Joe Wiggins, PR Manager for Protection at Legal & General, says that having a fully protected mortgage "gives peace of mind".

He explained: "Most people don't fully appreciate that sick pay from an employer does not last that long.

"Many people suffering a loss of earnings would soon find that they would struggle to meet their mortgage payments, so mortgage payment insurance could make a huge difference."

Those who have stretched themselves financially may also want to take out an MPPI policy, as a tightening in finances or downturn in the economy could unexpectedly render them unable to make repayments.

How much will it cost?

According to Thisismoney.co.uk, a typical policy for a mortgage that requires repayments of around £650 per month would cost £450 per year.

This cost entitles policy holders to start claiming for mortgage repayment cover after one month of being out of work.

Most policies will then continue to pay out for 12 months thereafter.

After this one-year-period it is expected that the homeowner will have either recovered from their illness or found new employment, depending on the original problem.

How to find the best policy

Mr Wiggins advises that potential consumers of an MPPI policy should consult a financial adviser, as these experts can help homeowners "navigate the protection market with confidence".

However, for those who do not have enough spare cash to enjoy the luxury of professional advice many price comparison websites, such as moneysupermarket.com or gocompare.com, will help consumers find the best-value policy for them.

Most mortgage lenders will offer borrowers the opportunity to purchase a MPPI policy from them, at the time of the transaction.

However, these policies can be purchased as a stand-alone product from many providers and banks – a list of which can be found on the Association of British Insurer's website.