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Mortgage life insurance

Make sure your mortgage payments are covered whatever happens

  • Protection for life’s ups and downs
  • Personalised quotes, suited to your needs
  • A small step towards Money Calm

What is mortgage life insurance?

Mortgage life insurance covers your outstanding mortgage balance should you die while the mortgage is still in place. You can take this insurance out on your own, or jointly as part of a couple. You can also choose between decreasing-term insurance or level-term insurance. Here’s what you need to know:

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    Decreasing term

    The pay-out for decreasing-term life insurance falls over the duration of your cover, usually in line with your mortgage balance, and the terms of both generally match up. This means your policy is designed to cover whatever mortgage payments are left to make at the point you pass away.

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    Level term

    A level-term policy is a little more expensive, as it ensures the insurance pay-out is the same regardless of when you pass away. This can be used to cover the remaining mortgage balance after your death, and could also provide a little extra to ease the financial burden on your dependants.

Do I need insurance to cover my mortgage?

Life insurance is usually a must for any homeowner who still owes money on their mortgage. In fact, most mortgage lenders require you to take out a policy before they finalise the loan – because if the worst should happen and the main earner passes away, earner passes away, their dependants might end up having the family home repossessed.

Mortgage life insurance ensures that your family will be able to keep up with the repayments and keep your home.

mortgage life

How much cover do I need for my mortgage life insurance policy?

The average amount of cover taken out for a decreasing-term single life insurance policy is £150,0002  – however the amount you’ll need will depend on your own circumstances. When you decide how much cover to take out on your policy, consider the following:

Your mortgage term

Your mortgage term

The length of your mortgage will have a major influence on how much cover you need: the longer the term, the more your repayments will be spread out

Income replacement

Income replacement

Other expenditures such as daily living costs also have a bearing, especially if your own contribution makes up a major part of the household’s income

Childcare and education

Childcare and education

If you have children, it’s worth factoring in how much you currently contribute to their upkeep and education – and how much they could cost up to age 18

Other debts

Other debts

Other outstanding debts which your family would struggle to repay without access to your income, such as car loans, should also be added to the running total

2According to MoneySuperMarket data, correct as of September 2020

Should i get joint or single life insurance?

Should I get joint or single life insurance?

If you’re part of a couple, you may want to think about a joint life insurance policy. These policies usually only pay out once, when the first policy holder passes away, with the money going to the surviving partner to pay off the remaining mortgage balance.

Joint policies can sometimes work out cheaper than two single policies. If you have dependants, however, it may be worth taking out two single policies – so you get two pay-outs. You can read more about the pros and cons of single vs joint life insurance here.

3Median premium per £100,000 life-only policy, according to data collected by MoneySuperMarket, accurate as of September 2020

How much does mortgage life insurance cost?

The cost of life insurance to cover your mortgage depends on a number of factors, including:

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    Your age

    As you get older, the risk of falling ill increases, so your premiums will go up too – which is why it’s better to take out cover when you’re young

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    Your occupation

    Certain occupations carry a higher risk. You’ll have higher premiums if you work as a commercial driver or a pilot, of if you work with explosives or at height

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    Your lifestyle

    If you’ve smoked in the 12 months before you take out your policy, you’ll probably pay more for cover. Exercise and your physical health are also considered

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    Your general health

    You need to notify insurers about any health issues you or your immediate family have had in the past so they can properly assess you

How to compare life insurance quotes

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Give us a few details about yourself,
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Choose the policy you want, click
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Which life insurance brands do we work with?

We compare 12 of the leading life insurance brands in the country, including:

company logo for AIGcompany logo for churchillcompany logo for Beagle streetcompany logo for Royal Londoncompany logo for Scottish widowscompany logo for canada lifecompany logo for post office
Neal Cross

Our expert says

"If you're getting a mortgage, the chances are you'll be asked to take out a life insurance policy before it's all finalised, which is something you should seriously consider. Your lender may have an insurer in mind, but you're not obliged to use them. In fact, it pays to shop around for the best insurance deal - you may well save a few extra quid."

- Neal Cross, senior commercial performance manager of life insurance

critical illness illustration of clipboard

Should I get critical illness cover with my mortgage life insurance policy?

Many providers offer the option of adding critical illness cover to a life insurance policy, which should pay out if you are diagnosed with a serious condition or critical illness. It can be a useful addition to mortgage life insurance, as it will ensure you can keep paying your mortgage if you are unable to work due to illness.

The illnesses covered by a critical illness policy include many types of cancer, strokes and heart attacks. Certain policies are more comprehensive than others, so it’s important to check the small print to see what you’re covered for.

MoneySuperMarket only offers what’s known as ‘additional critical illness cover’, which you pay for on top of your regular life insurance. This policy offers two potential pay-outs: one if you become critically ill, and another when you pass away.

Do I need protection for my business?

Losing someone important to you is never easy, and if you’re a business owner you will also have to consider the impact losing a key person can have on your operations.

Taking out a key person insurance policy can protect your business in the short term by providing a cash boost. So if someone key to the operation of your company passes away or becomes unable to work as a result of their health, it can help you survive in the short term and give you more time to make long-term plans.

 

key person image

Mortgage protection vs life insurance

Mortgage protection is a shorter-term form of insurance, which is designed to cover you if you fall seriously ill – but not terminally. If you are too sick or injured to work for a period, it will cover your mortgage payments for between one or two years, just until you get back on your feet.

Need advice on life insurance?

We run our life insurance service with our partner, LifeSearch. If you’d like some guidance about what kind of cover you need, you can talk to them free of charge. Give them a call on 0800 197 3178.

Their opening hours are: 

  • Monday to Friday 8am to 8pm
  • Saturday 9am to 2pm
  • Sunday 10am to 3:30pm 
Phone lifesearch

In most cases if you’re over 18 and a UK resident you should be eligible, but some insurers may also have an upper age limit.

Your mortgage provider may offer decreasing term life insurance as part of your mortgage deal, but you should always shop around for quotes to ensure you get cover for the best price.

It shouldn’t, but you should check the interest rate on your mortgage doesn’t become higher than the rate applied to your life insurance policy – you should remember to adjust your cover amount if you make any changes to your mortgage terms.

You can generally put your life insurance policy in trust, so your beneficiaries don’t have to pay inheritance tax on the pay-out.

It can differ between insurers, but you should be able to make the following changes to your policy:

  • Change the length of the policy term
  • Change the amount of cover
  • Add or remove someone from the policy – you may be able to separate a joint life policy in the event of a divorce, the dissolution of a civil partnership or a new mortgage term
  • Switch between annual and monthly payments

Keep in mind that making changes to your policy can result in an increase or decrease to your premiums.

You should be able to cancel your life insurance policy, or as mentioned above remove yourself from a joint policy, but you should check if there is a cancellation fee involved. You won’t get the premiums you have already paid back.

No. If you live past the term of your insurance policy, the money is gone. You can buy what’s known as whole-of-life insurance or life assurance, which has no term and will pay out whenever you die, but it’s more expensive.

 

With general life insurance, your dependants can use the money for anything they like. Mortgage life insurance is used specifically to pay off the mortgage in your absence.

 

If your mortgage provider goes bust, your mortgage is not cancelled. The debt to the lender still stands, as does its partial claim to your home.

The administration process that goes on in the wake of a collapsed provider makes sure that your account is sold onto another bank or building society, or possibly an investment firm. You would simply owe the same money to a different provider.

You can put your life insurance in trust, which is a way of legally avoiding inheritance tax on the pay out. Find out more about it here.

MoneySuperMarket gives you lots of clever ways to save a lot, by doing very little.

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So how do we make our money? In a nutshell, when you use us to buy a product, we get a reward from the company you’re buying from.

But you might have other questions. Do we provide access to all the companies operating in a given market? Do we have commercial relationships or ownership ties that might make us feature one company above another?

We commit to providing you with clear and informative answers on all points such as this, so we have gathered the relevant information on this page.

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