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Mortgage Life Insurance

Your mortgage is probably your biggest financial commitment, so it makes sense to cover it
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What is mortgage life insurance?

If you die before your mortgage is paid, mortgage life insurance covers what’s outstanding. This means your loved ones don’t have to absorb your mortgage debt and, if it impacts your family home, your death doesn’t force people you love to sell up and move on.

The short answer - not usually, but it’s definitely important.  

There’s no legal requirement for it the way there is on car insurance, but many lenders do require you to have cover as a condition of your mortgage.

If you don’t have any dependants and are purchasing a property by yourself, there might not be much of a need for mortgage payment insurance as if you were to pass away during the mortgage term, the property could be sold to pay off any outstanding mortgage.

If you have a family however, you should seriously consider taking out mortgage protection insurance because if anything was to happen to you, it will impact your loved ones - and this type of policy can help to keep a roof over their heads.

Your mortgage is probably the biggest financial commitment you’ll ever have. Almost certainly it’s the longest-term debt you’ll ever take on.

Do you ‘need’ to get it? Not in the legal sense. But ‘should’ you get it?  Yes. Otherwise, who’ll pay your mortgage if you’re not around? You’ll either pass on the debt to your loved ones, or in a worst-case-scenario the lender will take the house back.

Both are avoidable if you protect your mortgage and ensure it’ll get paid if the worst happens to you.

LifeSearch provide you with top customer service and ongoing support should you ever need it.

  • Insurer benefits - did you know that you may be eligible to free benefits from your insurer?  Take a look at what your insurer can offer, here.
  • Refer a friend - Love what we do? Refer a friend and you could both earn a reward.
  • Will writing - We are partnered with Which?, and can offer support and discounted rates - just speak to your adviser
  • Policy reviews - we know that life and circumstances change, so our specialist review team will keep in touch to make sure your policy is up to date
  • Trusts - we can point you in the right direction towards putting your policy into Trust.

Not sure what a Trust is? Read more about putting your life insurance into trust.

Your options

There are two main kinds of mortgage life insurance, level term and decreasing term.

Level term mortgage life insurance

For level term your cover remains the same and stops after an amount of years

Let’s say you’ve a £250,000 mortgage and you buy £250,000 in level term mortgage life insurance for 25 years.

The ‘level’ bit is key. It means the total amount you’re insured for (£250,000) stays the same across those 25 years.

  • If you die on day 9 your loved ones’ pay-out will be £250,000.
  • If you die on day 900 your loved ones’ pay-out will be £250,000.
  • If you die on day 9,000, your loved ones’ pay-out will be £250,000.

Over time, you’ll owe less and less on your mortgage. So if you die late in your policy term, your loved ones can pay off what’s outstanding on the house, with plenty of that £250,000 left over for other things.

Advantages of level term cover

  • Your premiums won’t change
  • You know what your loved ones will get
  • Extra financial support (assuming you die late / later into your mortgage term)

Disadvantages of level term cover

  • It can be more expensive
  • Takes no account of inflation (you may be able to add this on at a later date – see below)

Decreasing term mortgage life insurance

For decreasing term your cover reduces over time in line with e.g. a mortgage

Let’s say you’ve a £250,000 mortgage and you buy £250,000 in decreasing term mortgage life insurance for 25 years.

The ‘decreasing’ part means the total amount you’re insured for (£250,000) decreases alongside your mortgage.

Say you die when there’s £150,000 left on the mortgage. That, then, is the lump sum pay-out.

Die with a year to go and your mortgage may be £10,000 – that then is the lump sum pay-out.

Advantages of decreasing term cover

  • Often cheaper than level term
  • Peace of mind your mortgage is covered
  • Premiums are fixed and will not change during the duration of the policy

Disadvantages of decreasing term cover

  • Pay out value decreases over time
  • Just covers mortgage, no extra to leave behind

You can choose to peg level term mortgage life insurance to inflation. It’s called indexation or index-linking.

This is advantageous because £250,000 now won’t have the same buying power in 10- or 20-years’ time.

Inflation and the cost-of-living drive up consumer prices over time. If you spent £100 in 2010 and tried to repeat the exact same transaction in 2020, you’d have needed £22 more.

Index-linking means that your level term mortgage life insurance pay-out rises over time to match the same buying power you had when the policy began. Premiums do go up to match, so you’ll gradually pay more in premiums to, again, reflect the rising cost of living.

Be honest, no worries

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LifeSearch From our Adviser Team

The main reason claims are disputed by insurers is if they feel they weren’t presented an accurate picture of the client’s health and / or circumstances. There’s an easy fix for this: be honest.

Being honest in a life insurance application will mean your cover is entirely relevant to you and your situation. It also avoids complications later.

Easy example: say you smoke but tell your insurer you don’t.

Your doctors notes would communicate that at the time of applying you were a smoker, and the insurer may question the validity of your policy - as it was created on a false premise, which could mean your loved ones are unable to claim on the policy in the event of your death.

 Mortgage payment insurance vs Mortgage protection insurance

Your search for a mortgage insurance product is likely to boil down to two broad options: mortgage payment insurance or mortgage protection insurance. So, what’s the difference?

Essentially, mortgage payment insurance covers your monthly mortgage payments if you aren’t working, until you get another job, or are well enough to resume the job you already have. It could therefore, save you from your home being repossessed if you lost your job, and couldn’t keep up your mortgage repayments.

Mortgage protection insurance is a type of life insurance. Having this type of cover would mean that if you passed away without having finished paying off your mortgage, your loved ones wouldn’t have to worry about keeping up the payments themselves.

There are a few reasons why we would especially recommend mortgage protection insurance over mortgage payment insurance, if you do decide to buy a mortgage insurance policy. For one thing, if you buy mortgage payment insurance, you might be wasting money to duplicate a lot of the protection that you already have. The pay-outs from an existing income protection policy or critical illness cover that you already hold for instance, could be partly put towards paying off any mortgage debt whilst you recover.

How much does Mortgage Life Insurance cost?

The average monthly premium of a decreasing term assurance policy, over the term of 25 years:

Starting Age Cost to cover a £200k payout
£6.13 per month
£6.93 per month
£8.39 per month
£10.92 per month
45 £15.71 per month
£24.45 per month
£41.53 per month


*Pricing information obtained 05/06/2023. This data is based on a non-smoker with no medical history.

Prices are for a decreasing term single life insurance policy. Life insurance costs vary, person to person. That’s not an excuse to dodge the question, it’s just reality. Your life insurance costs will first be based on the kind of policy you want, and then on a risk score that factors in your health, your home life, your job, your mortgage, your hobbies, your age, if you smoke etc…

If you’re like many others, you’ll probably base your life insurance policy on the value of your mortgage. That means your life insurance will cover the house if you pass away before it’s paid-off.

Life insurance cost and cover calculator

Our simple calculator can help you to work out what insurance you need and give you estimated costs for different types of life cover. You can then speak to an adviser or buy online.

Get costs & cover ideas

Frequently asked questions about mortgage life insurance

The type of mortgage you have, your home set-up, health, budget, debts, and any other protection covers (critical illness insurance, income protection etc) you want to explore will all play a part in the protection that’s best.

So, we’d rather not second-guess it now. Tell us about yourself and a LifeSearch expert can match you up with policies that’ll work for you - your present needs and future plans.

Joint mortgage life insurance is a good option if you and your other half share the bills and rely on both incomes to keep life running. In most cases, a joint policy is cheaper than two singles, but it will only pay out once – following the death of one partner – leaving a surviving partner unprotected.

There’s a myth that insurers look for any excuse to withhold claims payments from customers. TV, films and the odd sensational news report perpetuate the idea that insurers don’t pay when in fact they do in the overwhelming majority of cases.

Recent data from the Association of British Insurers found that just over 98% of all claims were paid in 2021. That’s billions of pounds in customer pay-outs and that happens every year.

On the few occasions where claims are not paid, it’s usually because the policyholder misrepresented, accidentally or deliberately, their health situation.

Whether you buy level term or decreasing term mortgage life insurance, you may see out your entire policy term. At that point, two things are worth noting: 1) your mortgage is paid off and 2) you’re still alive.

Yes, that means you never got your claim but, silver lining, you’re still alive.

Assuming your mortgage term reflects your mortgage life insurance (and vice versa), you may come to the end of your term. Your mortgage is paid, and you haven’t had to claim.

At that point you may not any longer be protected by your mortgage life insurance, but plenty of other protection policies are available, now or later, to cover you and your loved ones from the impact of illness or to arrange a financial cushion for after you die.

If you want to explore cover that lasts beyond your mortgage term, speak with a LifeSearch expert. We build policies to fit your plans and what you need to feel secure.

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