Updated: November 14, 2019

Mortgage Life Insurance

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Pete Mugleston

Author: Pete Mugleston - Mortgage Expert

Updated: November 14, 2019

Many people take out life insurance to ensure their families are able to keep up with mortgage payments in the event of their death. But having life insurance isn’t a legal requirement when getting a mortgage.

So when should you take out life insurance cover for your mortgage, and what does it cover? Is it a vital precaution, or an extra expense you might be able to do without? How can you find your most suitable offer for life insurance and mortgages?

In this article, we cover the answers to these questions and more…

Mortgages and life insurance explained

Many people choose to take out life insurance when they buy a property.

Getting cover becomes especially important in situations where you are the main family breadwinner and the sudden loss of your income through an unexpected illness or death could leave your loved ones struggling to pay off the mortgage. Or, in the worst-case scenarios, being forced to sell the property.

Getting suitable life insurance to cover your mortgage in the event of a sudden loss of income will give you peace of mind that you’ve built a financial safety net to see you and your loved ones through any eventuality.

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Should I get life cover for a mortgage?

It really depends on your personal preferences and financial situation. Life insurance for your mortgage means taking out enough cover to pay off your mortgage should you die or become critically ill.

You need to make sure the life insurance payout is large enough to pay off your mortgage; this will give you peace of mind that your family will be well taken care of and not left with an insurmountable financial burden if they were to lose the prime breadwinner.

How does life cover for a mortgage work?

Mortgage life insurance links your cover to a mortgage which is paid off over time as you make monthly repayments to your lender.

It’s also known as decreasing term life insurance or mortgage protection insurance; the total sum you’re covered for decreases at the same rate as your mortgage loan as your insurance policy term progresses.

This can often make mortgage life insurance cheaper than getting a standard level term policy.

Your life cover will provide a pay-out if the policyholder passes away before they pay off their mortgage. It’s usually set up so that the lump sum payout decreases over time in line with the remaining mortgage cost.

How do I get life cover for a mortgage?

When you purchase a house your mortgage lender may offer you a package deal which includes life cover. But bear in mind that you’re not under any obligation to purchase life cover from them; the best offers are obtained from searching the whole mortgage life insurance market.

Taking the time to compare life insurance quotes and offers will ensure you find a policy that best suits your needs. The best way to get a good deal on your mortgage life insurance is to request quotes and compare policy rates from the whole market.

If you’d like help with finding the right cover at the best premium rates possible, an independent financial advisor, like the ones we work with, can do the legwork for you.

Finding the right deal for your life cover can save you thousands of pounds and give you peace of mind that your policy will payout exactly the sum you require.

Leave an enquiry  and we’ll connect you to an experienced insurance advisor for a free, no-obligation chat

Do I have to have life insurance for a mortgage?

No, it’s not compulsory to take out a life insurance policy in order to get a mortgage, or after you’ve taken one out. However it is different for building insurance because it is a requirement from all lenders that your house is covered when you take out a mortgage.

Can you get a mortgage without life insurance?

Yes, you can get a mortgage without life insurance.

Lots of people think it’s mandatory to have life insurance with a mortgage, but the only type of insurance you are usually obligated to take out when you get a mortgage is building insurance.

However, most financial experts highly recommend you get insurance with mortgage cover that’s adequate to make sure all your hard-earned savings invested in the property aren’t lost, and any dependants are well-cared for should anything happen to you.

Life insurance cover that includes critical illness is a safety net that often proves critical to families being able to keep their home if anything happens to the main breadwinner.

How to get a mortgage and life insurance

Whether you’re looking for mortgage life insurance in Ireland, Scotland, England or Wales,  shop around the whole of the UK life insurance market to find your best offer.

You can compare life insurance policies on online comparison sites for a rough idea of how much you would need to pay in premiums to get the lump sum payout you’d require to cover your mortgage.

Alternatively, you can go directly to insurance providers and tell them a bit about yourself to get an accurate quote on what sort of cost you might need to pay on your mortgage life insurance premium.

Most providers will need to know your age, occupation, and general health history to give you a quote tailored to your situation.

However, providers won’t show you how their rates compare to the rest of the market, and online comparison sites will only offer a rough estimation of premiums.

For the best offers, make an enquiry and speak to one of the independent financial advisors we work with. They will be able to answer all your questions and match you with a provider and policy tailored to your life insurance needs.

What type of policy should I get?

There are different types of life insurance cover that could help you cover your mortgage, however, the two main types on the market are decreasing and level term life insurance.

Decreasing term life insurance reduces the pay-out over the duration of the policy. It’s a popular choice for those looking for mortgage life insurance as the pay-out shrinks in line with your outstanding mortgage. This is a good option for when you need life insurance solely for your mortgage and don’t want to continue to pay any more into a policy than is necessary.

Level term life insurance policy, on the other hand, offers a pay-out which remains the same throughout the entire length of your term. This policy is good for those who want a lump sum payout that’s enough to both cover the mortgage and offer a little extra to cover additional needs or living costs for your loved ones. Level term insurance is often more popular with those searching for life insurance.

Each life insurance mortgage type serves a unique purpose and what’s right for you will depend on your situation. Make an enquiry to be connected to an expert insurance advisor who will take your finances and lifestyle into account to help you decide which option would be best for you.

Should I get life insurance with critical illness cover?

A critical illness can have a serious financial impact on your life and livelihood, rendering you unable to work or earn money for a prolonged period. In a situation where your mortgage repayments are dependent on your salary, it’s often a good idea to take out mortgage life insurance that includes critical illness cover.

Policies vary for critical illness cover, but most cover the most common life-threatening illnesses including cancer, a stroke, or a heart attack.

The type of critical illness cover you select will impact how your policy pays out, so it’s important you carefully consider which cover would be best for your needs and get expert advice.

  • Additional critical illness cover – will pay out both if you were  to become critically ill and if you pass away.
  • Combined critical illness cover – will only pay out once either if you become critically ill or when you die.

While a critical illness policy is often worth including in your mortgage life insurance, it will increase the cost of your insurance premiums.

Getting expert advice when taking out insurance can ensure you keep these costs as minimal as possible without compromising on your insurance needs.

How do insurers decide how much life cover should cost?

The cost of your mortgage life insurance will depend on how much cover you want to take out, the type of policy you need, and factors specific to your situation, health, and lifestyle.

Insurance pricing radically changes depending on…

  • How old you are
  • Your profession and whether it puts you at risk
  • Your lifestyle and whether or not you smoke
  • Your overall health and medical history

Mortgage protection or decreasing mortgage life insurance can be a more affordable option as your premiums will decrease over time.

Level term life insurance generally costs more because it will pay out the initial agreed lump sum at any point triggered in your policy.

As with all insurance, age plays a major role in price, and the younger you are when you take out level term life insurance, the cheaper your overall monthly premiums will be.

It’s very important to disclose all information about your health and any risks; insurers can use ‘non-disclosure’ as an excuse to not pay out if any information is inadvertently or deliberately withheld in your application.

Each insurer has its own set of rules and prices for medical conditions, so it’s worth speaking to an expert who will know which insurers will offer you the best rates for your situation. Make an enquiry and we’ll match you with one of the expert insurance advisors we work with.

What’s the difference between life insurance and mortgage life insurance?

Depending on the mortgage life cover you choose, there is not much difference between getting a term life insurance policy and a term mortgage insurance cover.

Both options will carry a term life insurance policy and make a death benefit payout should you pass away.

However, mortgage life insurance has its place as cover that’s specifically designated to cover the remainder of your mortgage in a worst case scenario. It offers the reassurance that whatever ensues, your mortgage is covered and your house is safe.

Should I get life insurance or mortgage life insurance?

A decreasing term life insurance gives you the option of gradually paying less insurance premiums until you have paid off your entire mortgage. It is designed specifically for people who solely want life cover as a backup to pay off the mortgage in the case of death.

If you’re unsure of which option may be best for you, make an enquiry for a free, no-obligation chat with one of the independent financial advisors we work with.

They’ll be happy to answer your questions and offer guidance on which policy is best suited to your needs. They will also make sure that, should you decide you need cover, you’ll get the life insurance you need for the best possible price.

What if I already have life insurance?

If you already have life insurance, it’s important to check whether the amount of cover you have would be sufficient to stand your loved ones in good stead and pay off your mortgage should anything happen to you.

If your current policy is a whole or universal policy, you may want to look into adding a term policy that would protect the mortgage.

It’s possible to have both of these policies simultaneously, so if you already have a whole life insurance policy, you could take out term policy to cover the mortgage. The term policy will expire when no longer needed to protect your mortgage, but you’d still have the death benefit from the other policy to help your family with any costs after you pass away.

How much insurance do I need?

It’s vital you get the right amount of mortgage life insurance to leave your family enough to pay off the house and maintain a good lifestyle if anything were to happen to you.

When it comes to your home and life insurance, many experts advise people towards the side of caution – consider a term policy with a payout that would at least match the remaining mortgage on your house.

How do I get mortgage life insurance for a joint mortgage?

If you have a joint mortgage, you have the option of buying two single mortgage life insurance policies or getting a joint couples policy.

A joint policy could be better for you if…

  • You are married or in a civil partnership; a joint policy is a good option as it’s less hassle to set up and cheaper than getting two single policies.

Getting two single life insurance policies for a joint mortgage could be more convenient if…

  • You have dependants who would benefit from getting two payouts rather than just one. Each policy will pay out when the policyholder dies, this can provide extra security for your family.
  • You won’t have to cancel the policy and buy a new one if you split up with your partner.

If you’re married, a joint policy mortgage life insurance is likely to be cheaper and the most convenient option. However, it will only pay out once if one partner dies, so if you have a family it’s important to consider whether your children or dependants would be on safer grounds with two single policies.

Speak to an expert advisor

Many people search for a policy through online comparison sites, but these often take a lot of commision and don’t compare the whole market.

The best way to get mortgage life insurance that’s tailored to your specific needs is to use an independent  financial advisor, like the ones we work with.

The right expert will help you find a balance between price and level of cover, making sure you get just the right amount of insurance. They’ll do the research legwork for you, helping you easily compare quotes and pick the right mortgage life insurance policy for you.

Call 0808 189 0463 or make an enquiry and we’ll match you with an insurance expert who can advise you on how to get the cover you need at the best possible price.

The service we offer is free and there’s no obligation. All the experts we work with are independent with access to all the insurance providers across the UK so you can be sure you won’t be missing out on any better deal.

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We can help! We know everyone's circumstances are different, that's why we work with brokers who are experts in life insurance. Ask us a question and we'll get the best expert to help.

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Pete Mugleston

Pete Mugleston

Mortgage Expert

About the author

Pete, an expert in all things mortgages, cut his teeth right in the middle of the credit crunch. With plenty of people needing help and few mortgage providers lending, Pete found great success in going the extra mile to find mortgages for people whom many others considered lost causes. The experience he gained, coupled with his love of helping people reach their goals, led him to establish Online Mortgage Advisor, with one clear vision – to help as many customers as possible get the right advice, regardless of need or background.

Pete’s presence in the industry as the ‘go-to’ for specialist finance continues to grow, and he is regularly cited in and writes for both local and national press, as well as trade publications, with a regular column in Mortgage Introducer and being the exclusive mortgage expert for LOVEMoney. Pete also writes for OMA of course!

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FCA Disclaimer

*Based on our research, the content contained in this article is accurate as of the most recent time of writing. Lender criteria and policies change regularly so speak to one of the advisors we work with to confirm the most accurate up to date information. The information on the site is not tailored advice to each individual reader, and as such does not constitute financial advice. All advisors working with us are fully qualified to provide mortgage advice and work only for firms that are authorised and regulated by the Financial Conduct Authority. They will offer any advice specific to you and your needs.

Some types of buy to let mortgages are not regulated by the FCA. Think carefully before securing other debts against your home. As a mortgage is secured against your home, it may be repossessed if you do not keep up with repayments on your mortgage. Equity released from your home will also be secured against it.

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