Mortgage Life Insurance

What is mortgage life insurance?

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Mortgage life insurance is for those tied into a mortgage which is paid off over time.

What is mortgage life insurance?

Mortgage life insurance is life insurance you take out to cover the cost of your mortgage payments for your dependants if you, or your partner, pass away.

It provides a pay-out if the policy holder dies before their mortgage is paid off. Usually the amount paid out decreases over time to match your remaining mortgage. This called decreasing term life insurance.

Mortgage life insurance is sometimes called mortgage protection insurance. This is not the same as Mortgage Payment Protection Insurance (MPPI). MPPI covers you for losing your job, having an accident or injury or being unable to work due to sickness, rather than if you pass away.

Do I need life insurance to cover my mortgage?

Mortgage life insurance can be useful if you have dependants, such as your family, living in the home you bought with the mortgage. As mortgages are major financial commitments, not being able to make a payment could end up with your home being repossessed.

However, with mortgage life insurance you can ensure that your family is able to keep up with the repayments and live in the home.

It may not be necessary if you don’t have any dependants, or anyone else living in your home, as no-one else will need to continue making the mortgage repayments.

What types of life insurance will cover my mortgage?

If you’re thinking about taking out life insurance to cover your mortgage, you should consider the different types of life cover that could help you:

Decreasing vs level

Decreasing term life insurance is when the pay-out amount reduces for the duration of the policy. This is a common choice for mortgage life insurance as the pay-out usually goes down in line with your outstanding mortgage balance.

The term of your policy usually matches your mortgage too, which means your life insurance will effectively cover your mortgage payments if you pass away before paying the sum off.

A level term life insurance policy ensures the pay-out remains the same regardless of when you pass away. This can be useful as the pay-out will not only cover your remaining mortgage balance after your death. It might also provide a little extra to ease the financial burden on your dependants.

Over 87% of people searching for life insurance enquire about a level term policy, compared to just under 13% of people looking for a decreasing term policy.

Most people look for level term life insurance rather than decreasing term

Data collected by MoneySuperMarket between January and September 2018, accurate as of September 2018

Joint vs single

If you’re in a partnership with someone else, you may want to think about a joint life insurance policy. They can be useful in certain situations, for example if you’re married but with no children or other dependants.

This is because they offer only one pay-out upon a policy holder passing away. The payout which would then go to the surviving partner who could then use this to pay off the remaining mortgage balance.

Joint policies can also sometimes be cheaper than two single policies, as well as being less hassle as you only have to deal with one set of paperwork.

The average monthly cost of single life insurance is £21.52, which comes to £43.04 as you’ll each take out a policy. This is slightly higher than the average monthly cost of a joint life insurance policy, which is £40.07.

But if you have dependants, it may be worth taking out two single policies – this way you get two pay-outs for the extra premiums you’ll probably pay. You can read more about the pros and cons with our page on single vs joint life insurance. 

Joint life insurance is slightly cheaper than two single policies

Data collected by MoneySuperMarket between January and September 2018, correct as of September 2018.

How much does mortgage life insurance cost?

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

  • Your age
  • Your general health
  • Your occupation
  • Your lifestyle

Level term life insurance is generally more expensive because to maintains the same payout throughout the term of the policy. In fact, it’s probably better to take out level term life insurance before you reach your later years as the price is cheaper the younger you are.

A level term life insurance policy costs on average £5.90 if you’re under 25, but reaches almost £30 once you pass 45 years old.

Age group

Decreasing term cover

Level term cover






















This is for a single life insurance policy with cover for between 20 and 30 years, with no CIC, for an amount between £150,000 and £200,000. Data collected by MoneySuperMarket, accurate as of November 2018.

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

Many life insurance providers offer the option of adding critical illness cover, which is designed to pay out if you are suffering with a serious condition or critical illness. Critical illnesses include cancer, a stroke or heart attack, but policies vary.

It can be a useful part of mortgage life insurance as it will ensure you can keep paying your mortgage if you are unable to work due to illness.

However, the type of critical illness cover you choose will affect how the policy pays out:

  • Additional critical illness cover offers two pay-outs – one if you become critically ill, and another when you pass away
  • Combined critical illness cover only offers one pay-out, either if you become ill or when you pass away

As a result of the extra cover, you can generally expect life insurance with a critical illness policy to be more expensive than without. The average cost of a single level term life insurance policy with critical illness cover for someone aged 18-29 is £13.74, while it’s £6.15 for the same policy without this cover.**

**This is for a combined critical illness cover life insurance policy for someone aged between 20 and 30, with a term length of between 10 and 20 years, and between £150,000 and £200,000 of cover. Data collected by MoneySuperMarket, accurate as of December 2018.

Writing my life insurance policy in trust

If you’re taking out a life insurance policy to pay-out for your dependants, you should think about writing your policy in trust. This means the money is put into a trust rather than as part of your estate.

It means your beneficiaries will get the money faster but it also does not add to your estate, so they won’t have to pay inheritance tax.

Comparing life insurance policies

Comparing life insurance policies on MoneySuperMarket is an easy way to make sure you find the best available deal. All you need to do is tell us a little about yourself, including your age, occupation, and general health, and we’ll give you a list of quotes tailored to your life insurance needs.

You can then compare quotes by the price and level of cover you’ll receive, letting you pick the perfect life insurance policy for you. Once you’ve chosen a deal, just click through to the provider to finalise the purchase.

However as with any insurance, you shouldn’t automatically assume the cheapest policy is best – try to aim for a balance between price and level of cover, so you don’t end up over- or under-insured.

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