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Mortgage Life Insurance
Life insurance that pays out to cover your mortgage will give you peace of mind, knowing that your home will be secure in the event of your death.
Do you need Mortgage Life Insurance?
Mortgage life insurance will pay off your mortgage in the event of your death, securing your home for your family.
If you think your family would struggle to make mortgage payments if you were to die, life insurance could protect them from financial hardship during what's already one of the hardest periods of their lives.
If you're confused about life insurance, we've written some quick guides to help you out.
What type of cover do you need?
There are two types of life insurance for mortgages. Which one you choose depends on the type of mortgage you have and whether you want to leave any additional money behind for your family.
Decreasing term
Decreasing term life insurance is designed for repayment mortgages. The amount you're insured for decreases as you pay off your mortgage.
Term insurances are designed to last for a set number of years that you can choose. Most people choosing decreasing term set their policy to last until their mortgage has been paid off in full.
After the term ends, unless you take out another policy you will no longer be insured and your family won't receive a pay-out if you die.
Level term
Level term life insurance is used to protect an interest-only mortgage. As you're only paying the interest off your mortgage, the mortgage amount will remain the same, as does the amount of cover. Due to this, premiums tend to be more expensive than decreasing term.
As a term insurance it protects you for a set number of years. Depending on your circumstances, you might take out cover until your partner's retirement date or perhaps when your youngest child reaches 18 and becomes less financially dependent on you. When the term ends, you will become uninsured.
How can I make changes to an existing plan?
Certain insurers will allow you to make changes to a policy including the term, the amount of cover and the frequency of payments. However, this depends on the individual insurer's terms and conditions. If you're allowed to make changes, ask if and how it will affect your premiums.
Would I be better off with a regular life insurance policy rather than a mortgage life insurance policy?
Mortgage life insurance is simply another way of describing a decreasing term policy.
Taking out a level-term rather than a decreasing-term policy could leave extra capital behind in addition to paying off the mortgage.
How can I calculate my cover?
How much mortgage debt do you have?
Most people choose cover the decreases in line with their mortgage payments. The starting cover amount should be the same as your mortgage debt.
What is the length of your mortgage?
To provide the most protection, ideally your life cover term should last until the day you pay off your mortgage in full. If the premiums prove too expensive, consider adjusting to the maximum term you can afford.
What type of mortgage do you have?
Decreasing term life insurance is designed for repayment mortgages. If however you have an interest only mortgage, a level term policy that pays out a fixed amount may be more suitable.
If you have any further questions, don't hesitate to call the Protected team on 0800 524 4153.
Should you take out life insurance through your mortgage lender?
Some lenders will offer a life insurance policy to you when your take out a mortgage. Whilst having cover in place is a good idea, you shouldn't accept the first quote you're given, especially since experts on mortgages aren't necessarily experts on life insurance.
A great place to start is a discount broker like Protected that can compare policies from multiple insurers.
How much does it cost?
The amount you pay per month is based on the likelihood that the policy will have to pay out and the amount of cover. As such these are the most common factors taken into consideration:
- Which policy you take out
- How much you'd like to be covered for
- How long you want the policy for
- Your age
- Occupation
- Health
- Lifestyle
Protected will compare prices from multiple insurers, helping you find the best mortgage life cover deals.
What is joint mortgage life insurance?
If there are two names on your mortgage contract then you may be wondering if it is better to have a joint life policy or to keep two single policies.
Joint policies pay out upon the death of the first person only, leaving the second person uninsured. The second person may find it harder or more expensive to become insured later in life because of their age or health problems which could have developed.
Surprisingly, having two separate policies can actually be cheaper than joint mortgage cover. Our team of life insurance experts can help you make the right decision and find a policy that's right for you and your partner.
Questions and Answers
- I want life insurance and know what I need now, but what if that changes in the future?
- What are the conditions for getting lower premiums with PruProtect's life insurance?
- What benefits does Bright Grey's Helping Hand provide?
- What if I get decreasing term cover and then have to move?
- Will a life insurance policy pay out if I am unable to work because of injury or illness?
- Which insurers offer bereavement counselling within their life insurance?
- What happens if I die between taking out insurance and getting my mortgage?
- What decreasing-term mortgage cover can I get as an expat?
- What are the options for joint life deceasing term life insurance?
- What are the features of Bright Grey's decreasing-term life insurance?
