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Life Insurance For Mortgages

Life Insurance For Mortgages

If you’re thinking of buying a mortgage, then you ought to be thinking about taking out a life insurance policy too. Find out how using some of your income today can protect the financial interests of your loved ones if you pass away. 

Kamran Altaf
From the Life team
minute read
posted 29 JANUARY 2020

What is mortgage life insurance?

Mortgage life insurance can be used to help your dependants meet any future mortgage payments if you die. This type of life insurance is often sold as a decreasing term policy, and it typically pays out as a lump sum. 

How does mortgage life insurance work?

As you pay off your mortgage over time, the amount of life cover you would get if the worst were to happen goes down – just as the outstanding balance of your mortgage does. This type of life cover is usually paired with a repayment mortgage, where monthly payments are used to repay the capital amount borrowed as well as any accrued interest. Learn more about how decreasing term life insurance works.

What’s the best mortgage life insurance cover?

The best mortgage life insurance cover will depend on you and your individual circumstances. For example, you may be slightly older or have a pre-existing medical condition that increases the cost of your policy. Whereas a younger person with no medical problems will get the same cover but at a cheaper cost. 

How much does mortgage life insurance cost?

The amount that you pay for this type of life insurance may depend on: 

  • Your age 
  • Your health and medical history 
  • Mortgage amount owed 
  • Your salary 
  • Level of cover required 

You’ll often find that a mortgage life insurance policy will cost less overall than, say, a level term life insurance policy, where you might pay more to guarantee a pay-out which is fixed for the whole policy life.  
The best way to get an idea of how much you could expect to pay – and whether or not your dependants will get a lump sum after you die – is by doing a quick comparison with us, and telling us everything about you and the level of cover you need.  
While it may seem obvious to say, you’ll need to know how much cover you need and for how long. So, ask yourself what the outstanding balance on your mortgage is and how many years are left before you pay it off. Then simply answer a few personal questions about yourself and we’ll provide you with a range of quotes for life insurance from our panel of providers. 

Do you need life insurance for a mortgage? 

Whether you take out a mortgage life insurance policy is completely up to you. While it’s easy to get cover alongside your mortgage, it’s not compulsory. A mortgage life insurance policy is designed for peace of mind so that, should the worst happen, your family’s future in your home is secured. 

It’s quite common to take out a mortgage life insurance policy at the time of your mortgage, so it can easily be viewed as a small extension to your standard payments.

What else should I think about?

So, all you’ll need to do is compare the various options and policy details to find cover that’s right for you. If you’d like some advice on mortgage life insurance, contact one of the advisers at LifeSearch. Give them a call on 0800 072 1147. (Mon-Thurs 8am - 8pm, Fri 8am – 7pm, Sat 9am - 2.30pm and Sun: 10 am - 3.30pm). 

Is there a difference between life insurance and mortgage life insurance? 

Life insurance is more of a general form of cover. It comes in many forms, but the beneficiary receives a payment upon your death that can be used however they wish. Mortgage life insurance is specifically designed to cover the remaining amount owed on a mortgage. So, while it’s still a potentially large payout, it must be used to cover the specific existing debt. 

Should I have two single policies or joint cover? 

While one joint life insurance policy can be cheaper than two single policies, it comes at another cost. Should you break up, the policy cannot be split between you, leaving any premiums you’ve been paying lost if you cancel the policy. Couples who have made previous financial commitments together are perhaps the most suitable for joint cover. For instance, if you’re home owners, a joint policy can pay off the remainder of the mortgage for the other. 

Taking out two single life insurance policies offers you the flexibility to list additional beneficiaries and change them depending on your situation. While they can be more expensive, you may find that ability to change your policy more easily a worthwhile deal. 

Should I get critical illness cover with mortgage life insurance?

If you’d like that additional security, critical illness insurance is available through many insurance providers as either an addition, or in combination with your existing mortgage life insurance policy. With a policy addition, you’ll receive separate payouts, one for critical illness and another upon death, whereas with a combination policy, you’ll receive one payment for either illness or death. If you fall ill and are unable to work, critical illness cover allows you to continue paying your mortgage with a regular, tax-free alternative income. 

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