It's a policy usually bought to pay off your outstanding mortgage in the event of your death. You may have also heard it called decreasing term life insurance.
Each month you pay your mortgage, the total amount you owe to the bank or building society decreases. If you have a mortgage life policy, the amount paid out in the event of a claim decreases at around the same rate.
While this product and your mortgage aren't linked, and it's up to you to ensure you've selected the right level of cover, the chart below should help to illustrate how the amount the life cover could pay out should reflect how much of your mortgage would be left to pay. This is based on a 25 year mortgage, with £100,000 borrowed*.
*Figures for illustration purposes only
When deciding whether you want to buy level life insurance, or decreasing term life insurance, it might be worth considering:
- If you don't have any dependents, you might want to just make sure your mortgage is covered
- If you do have a family, it could be worth considering a level term life insurance policy to not only cover your mortgage, but also leave your family a nest egg to help them maintain their standard of living after you've gone
- Do you have other financial commitments like loans or credit cards you'd want included in the amount the life policy would pay out? If you're not sure of the total value of your financial commitments, try our mortgage life insurance calculator to get a better idea of how much cover you'd need