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Mortgage life insurance

Protect your family with mortgage life insurance

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

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What is mortgage life insurance?

Mortgage life insurance is designed to pay off your mortgage when you die. So your loved ones can keep your home and won't be left with mortgage repayments they can't afford. It's usually available as a decreasing term or a level term life insurance policy.

With both decreasing term and level term policies, just like standard life insurance, a lump sum will be paid if you die during the policy.

With level term policies, the same amount is paid out, no matter when you die.

But with decreasing term policies, the payout amount decreases over time with the balance of your mortgage.

Decreasing term policies are usually cheaper, and suitable for repayment mortgages where the mortgage balance decreases over time.

Level term life insurance may be better for you if you've got an interest-only mortgage with a fixed balance where repayments only cover the interest.

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Do you need life insurance for a mortgage?

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

They might offer you life insurance themselves, but you don’t have to take them up on this. It's actually worth comparing life insurance policies to find a better deal. We compare the most popular life insurance providers and show you our best price for the amount of cover you need.

If you die before your mortgage is paid off, your loved ones might be left with repayments they can’t afford. In some cases, this could force them to sell your home to cover the outstanding debt. Mortgage life cover helps avoid that.

It might also take some of the financial strain off your family if you die unexpectedly. Without a mortgage to pay, they might be able to support themselves better financially in your absence. This could give you peace of mind that they wouldn’t struggle financially without you.

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

The main difference is the payout amount. Both mortgage life insurance and life insurance will offer decreasing term life insurance or level-term life insurance.

  • Mortgage life insurance is commonly bought as a decreasing term life insurance policy. So it pays out less the longer you have your policy. It's usually more suited to repayment mortgages where your balance decreases as you make regular payments.
  • The most common type of life insurance is level term life insurance, it pays the same amount no matter when you die. It can be used to pay off a mortgage, but is usually more suited to interest-only mortgages.

Most life insurance policies last for 20 to 30 years, or until you reach a set age limit. If you’re still alive after this time period, or after your mortgage is paid off, the policy ends and you get no payout. On the other hand, whole life insurance policies are designed to cover you for as long as you want them to.

How does mortgage life insurance work?

When getting a mortgage life insurance policy, you:

  • Choose the amount of cover you need. This is usually 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. You choose the one that best suits your needs.

Once you’re accepted, you'll start paying your monthly payments.

If you die during the policy term, your policy should pay out your remaining mortgage balance. This payment goes to the people you name as your beneficiaries, who can use this money how they want. As mortgages are usually the biggest financial burden, this payout could be used to clear that outstanding debt.

How much mortgage life cover do I need?

The amount of cover you get should match the amount you owe on your mortgage. As everyone’s mortgage is different, the amount you need is specific to you.

The amount your policy pays out decreases over time, so you should check that it goes down at the same rate as your mortgage. Get too little cover, and your payout might not be enough to clear your mortgage if you die. Get too much cover and you could be paying more than you need to be.

If you extend your mortgage or increase the amount you borrow, contact your insurer to update your policy to cover your new mortgage.

The best way to get a policy that works for you is to cover the amount you owe on your mortgage. You can check your latest mortgage statement or speak to your lender to get your most recent mortgage balance.

Struggling to work out the right amount? Try our 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 insurers work them out based on a range of factors.

We've set out some examples below for different ages. These are based on a decreasing term policy with £100,000 of cover over 20 years.

Age Monthly cost1

1. Based on £100,000 of decreasing term cover for 20 years, non smoking male with no underlying health conditions (April 2023).

How do you get a mortgage life insurance quote?

Getting a quote is quick and easy.

We’ll need a few details from you, and 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.

Compare mortgage life insurance quotes

Do you have to pay tax on your mortgage life insurance pay-out?

Your life insurance payout forms part of your estate. This is the total sum of everything you leave behind after you die.

If the value of your estate is less than £325,000, your beneficiaries pay no tax on it. If your estate, including your payout, exceeds £325,000, they'll have to pay 40% inheritance tax on anything above that threshold.

There are legal ways to avoid this. Writing life insurance in trust allows you to keep your payout separate from your estate. So your beneficiaries get the full amount tax-free, even if your estate is more than £325,000.

After tax, there might not be enough life insurance to cover your mortgage. So putting your policy into a trust may be a smart way to ensure they get the full amount.

Mortgage life insurance

Does mortgage life insurance cover pre-existing medical conditions?

A pre-existing condition is an illness or long-term injury you knew about before buying a life insurance policy.

Common pre-existing conditions include:

  • Asthma
  • Diabetes
  • Heart disease

Insurers have their own list of what counts as a pre-existing condition, so it’s worth checking with them before buying a policy.

You should still be able to get mortgage life insurance if you have a non-life-threatening pre-existing condition - you might just have to pay a little more.

Can you 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 add this as an extra to your mortgage life insurance policy. 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 payout could be:

  • The full amount you’re covered for under your life insurance policy
  • A separate amount that 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.

Compare mortgage life insurance quotes

Need more help?

Is mortgage life insurance the same as mortgage protection insurance?

No, these are different policies. Mortgage life insurance gives a lump sum to pay 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 you lose your job. Most policies pay out for a maximum of a year.

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

Joint life insurance policies cover 2 people at once, so if either of you die, your beneficiaries get a payout. After that, your policy ends.

This could be useful if you've got a mortgage together, as it lets your family pay off the debt if one of you dies.

But joint policies only pay out once. If you both die at the same time, your beneficiaries only get a single payout. This might be enough to cover the mortgage, but it might not be enough to cover:

  • Other debts such as credit cards, personal loans or car finance agreements
  • Funeral costs
  • Financial support for your children and loved ones after you’re gone

You could avoid this by taking out 2 policies - a joint mortgage life insurance policy, and a second joint life insurance policy. That way your payouts cover both your mortgage and the outgoings your family would need to keep living comfortably.

If you’re just looking to make sure your mortgage is covered, though, then a joint mortgage life insurance policy could be worth considering.

Just be aware that if you separate from your partner and decide to end your policy, you don’t get back what you’ve paid.

Anyone over 18 can be part of a joint life insurance policy. They don’t need to be a spouse or relative, but you do need to share the same address.

Joint mortgage life cover is usually more expensive than single life insurance policies as you’re covering 2 lives at once. But it’s usually cheaper than taking out separate policies for each person.

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

Yes, you can. If you’re the only policyholder and your marriage ends you can keep paying for your policy to stay covered.

If you have a joint policy, you should be able to remove the second policyholder and continue with a single-person policy. Your monthly payments are likely to change, so get in touch with 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 alter it to better suit your new situation. Calling your insurer is the easiest way to see what your options are. Or try our 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 cover you if you die due to illness or an accident. But there are a few situations where your mortgage life cover might not pay out.

These can include death as result of:

  • Drug or alcohol abuse
  • A reckless act
  • Suicide

Failing to pay your insurance costs could also deprive you of a payout. Miss too many, and your policy could be terminated. You then lose everything you’d paid so far and are unlikely to get a payout if you died.

Most policies have a grace period though, so if you do miss a payment, you might be able to make up that balance and keep your cover. If you’re struggling to meet your monthly payments, it’s best to get in touch with your life insurance provider before things get that far.

Does mortgage life insurance cover terminal illnesses?

Many life insurance policies pay out if you’re diagnosed with a terminal condition. If the condition is included in your policy details, you could claim the full 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.

Generally, an illness is terminal when it can’t be cured and it limits your life expectancy to 12 months or less. Some insurers might have a different definition of what a terminal illness is, so it’s worth checking with them before you take out a policy.

Terminal illness cover is free of charge. This is different to critical illness cover, which is an add-on to your life insurance policy that comes at an extra cost.

Will I need a medical to get mortgage life insurance?

Some insurers might ask you to have a medical examination before they offer you cover. This depends on your:

  • Age
  • Health
  • Lifestyle habits
  • Family medical history

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, or who’s smoked their whole adult life.

The point of a medical is to assess your general state of health. This helps insurers determine your risk of dying during the term of your policy. This risk impacts your monthly payments. If you’re not in good health, your policy might be more expensive than someone who’s healthier.

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 should be able to find cover without disclosing anything about your state of health. The only drawback is that the payout you get might be lower. Before you sign up, make sure it’s enough to cover your mortgage.

Does my mortgage life insurance payout have to be used for my mortgage?

If your beneficiaries make a successful claim after you die, the payout goes directly to them. It’s up to them how the money is used. They could use it to pay towards funeral costs, or cover other debts.

But most people use the payout to cover the costs of the mortgage. As this is usually the biggest outstanding debt, 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 to cover these debts.

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