Life Insurance vs Mortgage Life Insurance

Life insurance isn’t the jolliest of subjects and by thinking about it, it can feel like you’re tempting fate. But take heart in the knowledge that you’re taking the right approach because it’s never too soon to think about protecting your loved ones’ financial security. So, when it comes down to it, what’s better, life insurance or mortgage life insurance? And what on earth is the difference?

What is life insurance?

Life insurance is all about making sure your loved ones are taken care of financially should the worst happen and you pass away. They would receive a financial pay out, the amount of which would depend on the policy that you take out.

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Level term insurance and whole of life policies

A popular type of policy is level term life insurance (sometimes called ‘family life insurance’ or ‘family protection’). Level term cover will provide a fixed lump sum to your beneficiaries if you die whilst the policy is active. You can choose the amount of cover and the length of your policy so it could 5, 10 or 25 years. If your policy comes to an end and you’re still around, then you won’t get a payout; but you can of course opt to take out another level term policy.

Because the money that’s provided is one fixed amount, it can be spent however your beneficiaries see fit – whether that’s to pay off a chunk or all of the mortgage or to provide an income for the day to day necessities.

You can also get ‘whole of life’ policies, which cover you regardless of when you pass away (so long as you keep up to date with your premiums). As you can imagine, whole of life policies tend to be more expensive because the term is for as long as you live. We don’t offer whole of life policies at

What is mortgage life insurance?

Mortgage life insurance is just another form of life insurance but with a potential different use. The plan is that it will be used to pay off your mortgage (clue’s in the name right?), even though you don’t have to use it for this.

You can get two types of mortgage life insurance – decreasing term/cover insurance and term mortgage insurance. Decreasing cover insurance is designed for people whose protection needs will decrease over time, so if you are paying off your mortgage for example.

Term mortgage insurance, on the other hand, is more suitable for interest only mortgages because the lump sum that gets paid out in the event of your death is fixed and the amount remains the same throughout the policy period.

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Which is better?

No one type of life insurance is better than another – it all depends on your circumstances and what you want to provide for your beneficiaries if you die.. The aim of mortgage life insurance is obviously more specific and if this is your only concern then it makes sense to take out a policy that covers this. But decreasing cover insurance will only ever be enough to cover your remaining mortgage – there’s no extra for any other debts such as loans, funds for school or university fees.

Level term insurance policies allow for more flexibility, so your family and loved ones can use the money where it’s needed. Of course, these policies tend to be more expensive because you’re paying for a guaranteed amount to be handed over if you pass away within the policy period.

Is there anything else I should consider?

Life insurance only pays out in the event of death; it doesn’t offer any cover if you become ill and can’t work – but you can opt to include critical illness cover This type of cover pays out in the event of you becoming critically ill. The illnesses covered in these policies vary by provider – so it’s really important to check what illnesses are covered and any conditions that aren’t covered. As healthy as you are now, critical illness insurance is worth thinking about; especially if you’re self-employed and your livelihood depends solely on you. 

Comparing life insurance

It’s not just breadwinners that need to consider life insurance, if you’re a stay at home parent or a carer, it’s easy to dismiss life insurance as something only those in paid employment need. But don’t underestimate your financial worth – how much would it cost to pay someone to do all of the work you do?

When you’re looking at life insurance, you need to be objective and consider how much your family would need to carry on financially. Our life insurance guides provide a wealth of information on different policies and whilst no-one likes to think about dying – it happens to the best of us, so let’s be prepared. When you’re comfortable enough with what you need, you can start comparing cover at to find the right type of life insurance for you.  

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Get a life insurance quote and start saving now

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