Mortgage life insurance

Ensure your mortgage is covered if you pass away

  • Get cover to pay off your mortgage if you pass away

  • Compare life insurance quotes from Aviva, Legal & General, Zurich and more

  • Get a quote in just 3 minutes

What is mortgage life insurance?

Mortgage life insurance is designed to pay off your mortgage if you pass away.

It ensures your loved ones can keep your home if you die unexpectedly, and that they aren’t left with mortgage repayments they can’t afford.

Just like standard life insurance, it pays out a lump sum if you die. But here, the pay-out you get decreases in line with your mortgage, so if you die at the start of your policy, you’ll get a larger pay-out than if you die at the end.

This makes it cheaper than regular life insurance, which pays out the same amount no matter when you die. 

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Do I need life insurance for a mortgage?

While it’s not a legal requirement, many mortgage lenders will ask you to take out life insurance when taking out a mortgage.

They might offer you life insurance themselves, but you don’t have to take them up on this, and you’ll often get a better deal by shopping around with us. We’ll compare the most popular insurers and find you our best price for the amount of cover you need.

If you pass away before your mortgage is paid off, your loved ones may be left with repayments they can’t afford. In some cases, this could force them to sell your home. Mortgage life cover can help avoid that.

It can also take some of the financial strain off your family if you die unexpectedly. Without a mortgage to pay, they may be able to support themselves better in your absence. This can help make an extremely difficult time that bit easier and give you a little peace of mind that they’d be okay if the worst happened.

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

The main difference is the pay-out your loved ones receive.

  • Mortgage life insurance is a type of decreasing term life insurance. This means that it pays out less the further into your policy you get. As the amount you’ll need to repay on your mortgage decreases over time too, this makes it ideal for covering the amount you owe.
  • Standard life insurance, also know as level term life insurance, pays out the same amount no matter when you die, which is why it generally costs more than mortgage life insurance.

Most life insurance policies run for 20 to 30 years, or until you hit a set age limit, but whole life insurance policies can cover you for as long as you want them to.

How does mortgage life insurance work?

When taking out a mortgage life insurance policy, you’ll:

  • Choose the amount of cover you need. This will be the amount you owe on your mortgage.
  • Choose how long you want your cover to last. This should be the same length as your mortgage.
  • We’ll then show you our best deals for the amount of cover you need. Simply choose the one that best suits your needs.

Once you’ve applied and been accepted, you’ll start paying your monthly premiums.

If you die during the cover term, your policy will pay out however much is left on your mortgage. This amount will go to the people you name as your beneficiaries, who’ll be able to use that amount to cover your mortgage.

How much mortgage life cover do I need?

The amount of cover you take out should match the amount you owe on your mortgage. As everyone’s mortgage is different, the amount will be specific to you.

The amount your policy pays out will also decrease over time, so you should check that it goes down at the same rate as your mortgage. Take out too little cover, and your pay-out may not be enough to clear your mortgage if you pass away.

Taking out too much cover is also a possibility. Do this and you could be paying more in premiums than you need to be.

Bear in mind that if you extend your mortgage, or increase the amount you borrow, you’ll also want to update your policy to ensure it’ll cover your new mortgage. Contact your insurer if this is the case.

The best way to get a policy that works for you is to tie your cover amount to the amount you owe on your mortgage.

Struggling to settle on the right amount? Try our guide for tips on figuring out how much life insurance cover you need. Or let our life insurance calculator do it for you.

Need more help?

Our life insurance calculator can help you work out how much cover you need.

How much is mortgage life insurance?

Life insurance costs vary, as premiums are based on a range of factors. The average cost of a policy is likely to be slightly higher.

We’ve set out some examples below. This is what most customers in each age bracket pay. These figures are based on average costs across all cover types with a pay out of below £325,000.

Age Average premium price1

1. Data from June 2021. All data for single applicant life insurance policies of all cover types with a cover amount of less than £325,000. This represents 91% of all applicant policies.

How do I get a mortgage life insurance quote?

Getting a quote is quick and easy.

We’ll need a few details from you. Having these to hand can speed up the process. We’ll ask you for:

  • Your name and age
  • The amount of cover you need
  • An overview of your medical history
  • Whether you have any pre-existing conditions

If you’re applying for a joint policy, we’ll also need the joint applicant’s details.

We’ll then compare quotes from the insurers we work with to find you our best deal.

Will I have to pay tax on my mortgage life insurance pay-out?

Your pay-out forms part of your estate. This is the sum total of everything you leave behind after you die.

If your estate amounts to less than £325,000, you pay no tax on it. If your estate, including your pay-out, exceeds £325,000, you’ll pay 40% tax on anything above that threshold.

There are legal ways to avoid this. Writing life insurance in trust allows you to keep your pay-out separate to your estate. This way, your beneficiaries will get the full amount tax-free, even if your estate still exceeds £325,000.

This can be a good idea if your mortgage exceeds £325,000. If your pay-out is over the threshold, the tax you’d have to pay on it may mean it’s no longer enough to cover your mortgage. Putting your policy into a trust is a smart way to ensure it is.

Mortgage life insurance

Does mortgage life insurance cover pre-existing medical conditions?

A pre-existing condition is an illness or long-term injury you’ve been aware of before taking out a life insurance policy.

Common pre-existing conditions include:

  • Asthma
  • Diabetes
  • Heart Disease

Insurers will have their own list of what constitutes a pre-existing condition, however, so it’s worth checking with them before taking out a policy.

You’ll still be able to get mortgage life insurance if you have a pre-existing condition, you might just have to pay a little more in premiums.

Can I get critical illness cover with my mortgage life insurance?

Yes. Critical illness cover is a life insurance add-on that gives you an extra level of protection against life-changing illnesses and injuries.

You can add this as an extra to your mortgage life insurance. This way, if you suffer a severe health issue, you can pay off your mortgage while you’re still alive. Depending on your policy, your critical illness pay-out could be the full amount you’re covered for under your life insurance policy, or a separate amount you choose when signing up.

What our life insurance expert says

Mortgage life insurance can be a great way to ensure your family can keep your home if you pass away. Just make sure to take out the right amount of cover so that your pay-out drops in line with your mortgage, otherwise you could be paying more in premiums than you need to be.

expert comment signature Louise Thomas personal finance

Louise Thomas

Life insurance expert

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Need more help?

Is mortgage life insurance the same as mortgage protection insurance?

No, mortgage life insurance pays off your mortgage in full if you die. Mortgage protection insurance covers your mortgage repayments for a short time if you’re too ill to work or lose your job.

Most mortgage protection policies will pay out for a maximum of a year. This can help you stay afloat if you’re ill and need time to recover, or while you’re looking for a new job. But mortgage life insurance is designed to clear your mortgage entirely once you’re gone. This ensures your family aren’t left with mortgage repayments they can’t afford and prevents them needing to sell your home.

Should my partner and I take out joint mortgage life insurance?

Joint life insurance policies cover two people at once, so if either of you die, your beneficiaries get a pay-out. After that, your policy ends.

This can be useful if you have a mortgage together, as it guarantees that it’ll be paid off if one of you passes away.

The downside is that joint policies only pay out once. If you both die at the same time, your beneficiaries would only get a single pay-out. This might be enough to cover your mortgage, but it may not be enough to cover other things, like the financial support your children will need after you’re gone.

You can secure yourself against this by taking out two policies - a joint mortgage life insurance policy, and a second joint life insurance policy, for example. That way your pay-outs would cover both your mortgage, and the outgoings your family would need to keep living comfortably if you passed away.

If you’re simply looking to make sure your mortgage is covered, though, then joint policies can be a good idea.

Just be aware that if you separate and decide to terminate your policy, you won’t get back what you’ve paid in in premiums.

Joint policies can be taken out with anyone over 18 – they don’t need to be a spouse or relative, but you do need to share the same address. They’re usually more expensive than single life insurance policies as you’re covering two lives at once but are usually cheaper than taking out two separate policies for each person.

Can I change my policy if I get divorced or move home?

If you’re the only policyholder and decide to end your marriage but keep your home, you can simply keep paying your mortgage life insurance premiums and you’ll continue to be covered.

If you have a joint policy, you should be able to remove the second policy holder and continue with a single person policy. Your premiums are likely to change however, so contact your insurer to see what they can offer you.

The same is true if you move home. You should be able to keep your existing policy but tweak it to better suit your new situation. Calling your insurer is the easiest way to see what your options are. Or try out guide on how to change your life insurance policy for tips on what to look out for.

When could my mortgage life insurance policy not pay out?

Most policies will cover you if you die due to illness or an accident. But there are a few situations where your mortgage life cover may not pay out.

These can include death as result of:

  • Drug or alcohol abuse
  • A reckless act
  • Suicide

Failing to pay your premiums could also deprive you of a pay-out. Miss too many, and your policy could be terminated. You’d then lose everything you’d paid in so far and would not receive a pay-out if you died. Most policies will have a grace period in which to pay, though, so if you do miss a payment, you’ll be able to make up that balance and keep your cover.

Does mortgage life insurance cover terminal illnesses?

Many life insurance policies will pay out if you’re diagnosed with a terminal condition. If the condition is included in your policy details, you’ll be able to claim for your full coverage amount while you’re still alive. You can then use it to pay off your mortgage before you die, making your remaining time a little easier for you and your family.

To be classed as terminal, you’ll have to be diagnosed with an illness that limits your life expectancy to 12 months or less. Some insurers may have a different definition of what a terminal illness is, however, so it’s worth checking with them before you take out a policy.

Terminal illness cover will usually be provided free of charge, unlike critical illness cover which is a charged add-on to your life insurance policy.

Will I need a medical to get mortgage life insurance?

Some insurers will ask you to have a medical before you’re offered cover. Whether you’re asked to have one depends on a range of factors, including your health, lifestyle habits and even your age.

If you’re a fit, non-smoking 30-year-old with no pre-existing medical conditions, you’re less likely to be asked to have a medical than someone older with a more complicated medical history, for example.

The point of a medical is to assess your general state of health. This helps insurers determine your risk of passing away during the term of your policy. If you’re not in the greatest of health, your policy might be a little pricier than someone who’s a little healthier, as your risk of passing away is greater.

If you’re older and are concerned about being asked to have a medical, or if you have a pre-existing condition, consider over-50s life insurance You’ll be able to find cover without disclosing anything about your state of health. The only drawback is that the pay-out you’ll receive will normally be lower with an over-50 policy, so ensure this is enough to cover your mortgage before you sign up.

Does my mortgage life insurance pay-out have to be used for my mortgage?

If your beneficiaries make a successful claim after you pass away, the pay-out goes directly to them. It’s then up to them how the money is used.

However, most people use the pay-out to cover the costs of their mortgage. As this is usually their largest monthly bill, paying it off takes a lot of the financial strain off losing a partner, or parent. It also means they’re able to keep their home, rather than having to sell it and move to a smaller, cheaper property.
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