Mortgage life insurance will allow your loved ones to repay the mortgage when you die.
Leaving them mortgage free with a roof over their heads.

What is mortgage life insurance?

Mortgage life insurance is a life insurance policy that pays out a lump sum when you die. The payout can then be used to pay off a mortgage. Your home is usually the largest investment you will make. Life insurance is a great way to ensure that it is properly protected for your dependants.

How does mortgage life insurance work?

Mortgage life insurance works by matching the outstanding balance of your mortgage to the amount insured. The length of the policy should match the number of years you have left to pay off your mortgage.

  •  If you have a capital repayment mortgage the most cost-efficient policy would be what is called ‘a decreasing term’ policy. Whereby the amount insured reduces over the term to approximately to match the reduction in your mortgage amount. It is important to note that the premiums for decreasing term policies remain the same each month.
  • If you have an interest-only mortgage, only the mortgage interest is paid each month. However, the amount of outstanding capital is not paid off monthly or reduced over the term. A level-term policy may be appropriate. In this way, the amount insured remains the same throughout the term of the policy, to match the outstanding mortgage.
Hard work ensures success. Concentrated young African women working on laptop while sitting at working place

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

The only difference between life insurance and mortgage life insurance is that mortgage life insurance is arranged with the objective of paying off your mortgage in the event of death.

Is life insurance better than mortgage protection?

Life insurance is not better than mortgage protection for a capital repayment mortgage. A personal life insurance policy will cost more in premiums than a decreasing term mortgage protection policy. The reason is if you have a personal life insurance policy when you die the full amount insured would be paid out.

With a decreasing mortgage protection policy, the sum insured reduces over time. Along with your outstanding mortgage. Therefore, if you live a long time, the amount paid out would be lower than when you first took out the policy. As the insurer will have to pay out less as the policy progresses. They are able to offer slightly cheaper premiums for mortgage protection.

When it comes to interest-only mortgages, a personal life insurance policy would be equally as good. As the amount insured would need to remain unchanged over the term of the mortgage. 

How long does a life insurance policy last?

How long a life insurance policy should last depends on what the policy is for:

  • For a mortgage, the policy should last until you have paid the mortgage off in full
  • For family cover the policy should last until your dependents are no longer dependent on you
  • For family income benefit, the policy should last until your children are grown up and out of private education or university.
  • For funeral cover, the policy if it is a whole of life one will last until you die.

What is a life insurance beneficiary?

A life insurance beneficiary is a person who will receive the insurance payout.

Are there different types of mortgage life insurance?

There are different types of mortgage life insurance. 

  • Decreasing term insurance for capital repayment mortgages. Where the sum insured reduces over the term of the policy, as your mortgage does.
  •  Level mortgage insurance for interest-only mortgages.  Where the sum insured remains the same like your outstanding mortgage amount.

To illustrate how both works see the illustrations below:

level and decr term graph

What is the best mortgage life insurance?

There is no one policy or insurer that offers ‘the best’ mortgage insurance. The best policy for you is one that is cost efficient and fits into your monthly budget. 

 

The best mortgage life insurance will closely fit your mortgage circumstances. It could also offer additional benefits that match your lifestyle and needs. Such as private GP services, 24/7 mental health support or nutritional and fitness advice. Our advisers can search the marketplace for the most suitable to match your needs. 

We work with a wide range of well known insurers as well as more specialist insurers, that provide cover when others won’t.

Request a call back today from your expert Future Proof adviser. Our advice comes at no-obligation. We get paid by the insurer if you decide to take a policy out with them. 

Asian family buy new house

Here are some frequently asked questions that our clients have asked us about mortgage cover

  • Whilst it is not a legal requirement to have life insurance to get a mortgage. Some lenders do make life insurance a pre-requisite to lending you a mortgage.

    Its presence makes their life easier should you pass away. This means that they can recoup the amount they have lent more quickly, without having to wait for the property to be sold. 

  • If you do not already have cover for your existing mortgage and have dependents who rely on your income to keep the roof over their heads. You should consider mortgage protection. 

     

    Have a think:

    • How would your dependants pay for the mortgage if you were to die and they no longer had your income to rely on? 
    • Where would they live? 
    • Do you have enough in savings to pay for the mortgage until they reach working age? 

    These questions will help you form an idea and guide you to whether or not you need mortgage protection.

  • There are many companies that offer mortgage life insurance eg banks, building societies and insurers. 

    However, you should seek advice if you have a pre-existing medical condition, high-risk job or hobby.  Insurers can increase your premiums to cover the extra risk posed to your life. In situations like this, your Future Proof adviser can search the marketplace. Speak with insurers before you apply and find the best possible premium and policy on your behalf. Saving you time and money.

  • t is a good idea to get critical illness cover with your mortgage life insurance. If you were to become seriously ill would you like the peace of mind that you can fully pay off your mortgage? Critical Illness Cover can be included on a joint or single life basis, with either Level or Decreasing Term insurance policies. It is more expensive than basic life cover, but provides you with much more protection.

    It will pay out a tax-free lump sum in the event of being diagnosed with any of the critical illnesses covered under the terms of the policy. There can be vast differences between insurers’ policy terms, so it really does pay to take some advice.

  • The best type of life insurance would depend on the type of mortgage you are wanting to take out.

    Whether it is a capital repayment mortgage, or an interest only mortgage. Each will require different types of mortgage protection policies. Ultimately though, life insurance is not a legal requirement to get a mortgage.

  • Ideally, you should insure the total amount of mortgage for the term of the mortgage. If you do not have the budget available to do this, then the answer is as much as you can afford to cover. 

     

    You might want to speak with your Future Proof adviser about whether you should reduce the sum assured or the term of the cover. There are pros and cons to both options and it is important the choice is made based on your own personal circumstances. It is best to speak with an adviser about this, as this should be a last resort. 

  • Each insurer is different when it comes to the premiums they charge for different types of mortgages. It is good practice to get advice to ensure that the type of mortgage protection best matches your mortgage. 

    Your adviser can then search the market and compare premiums on your behalf. Our advice is no-obligation, we get paid by the insurer if you decide to take out a policy wth them.

  • If you are a first-time buyer getting on the property ladder, with no dependents and no joint mortgage, then mortgage protection may not be worth it.

    A bigger priority would be protection your income. An income protection policy  would pay you a replacement income if you are too ill to work. Or, critical illness insurance that would pay out a lump sum which could repay your entire mortgage balance should you become seriously ill ( cancer, stroke, heart attack). 

    Take a look at Critical illness cover and income protection.

What does mortgage life insurance cost?

An idea of mortgage life insurance costs is shown below in the table. The decreasing term insurance would be for a capital repayment mortgage and the level term insurance for an interest-only mortgage. Please note that any premiums mentioned are indicative only and based on this specific case study/ example, which is shown for information purposes only. Your own circumstances will determine whether the amount payable is more or less than the figure quoted.

Age of client in years Amount insured to match mortgageLevel Term Insurance premiumDecreasing Term Insurance premium
30£200k£7.70£5.63
30£500k£14.81£10.29
40£200k£14.61£9.77
40£500k£32.61£20.37
50£200k£36.11£22.68
50£500k£83.20£52.81

What is the cheapest mortgage insurance I can get?

To give you an idea of the cheapest premium payable for your mortgage

For mortgage insurance, take a look at our 4-step online premium calculator Get a quote 

Or for a precise quote on your personal circumstance call Freephone 0800 644 4468Monday to Thursday from 09.00 to 19.00 and on Friday between 09.00 and 17.00. 

You can also request a call back at a time convenient to you.

Our advice is no obligation.

I am pleased that we have agreed!

Is it best to get mortgage protection through a broker?

For peace of mind and to save time and money, our advisers will search the market for the best mortgage protection on your behalf. Finding you the most suitable policy for your mortgage and the most useful additional benefits. 

Whilst you are welcome to use a comparison site, the suitability of your policy and its match with your circumstances rests on your shoulders. Our advice is no-obligation, we get paid by the insurer if you decide to take a policy with them. You have nothing to lose and our advice is guaranteed. *  

St. James’s Place guarantees the suitability of the advice given by members of the St. James’s Place Partnership when recommending any of the wealth management products and services available from companies in the Group, more details of which are set out on the Group’s website at www.sjp.co.uk/products.

Frequently asked questions relating to mortgage protection policies

  • Yes, there are term limits on mortgage life cover of up to 40 to 50 years according to different insurers.

  • A single mortgage protection policy can cover the entire amount of a joint mortgage, or half. However, it would be advised that both co-owners have their own policies to avoid one being insured when the other is not. 

  • A mortgage life insurance policy can cover multiple mortgages. However, it is important that you take note of where the mortgages differ. Do they have different terms? If they are all different, you could be paying over a term that is longer than one of your mortgages. Ie overpaying. Advice should be taken as to the most cost-efficient way to cover multiple mortgages.

  • If you have an interest-only mortgage you can still get life cover. It would be in the form of a level term mortgage protection policy. The amount insured would remain the same throughout the term of the policy to match your outstanding mortgage balance.

  • There is an age limit on mortgage life insurance. You must be under 87 years old. 

  • Being retired will not have an impact on your mortgage cover. It is more your age and medical condition that will impact an offer of cover. As long as you are under 87 years old you will be considered for mortgage cover.

  • You can have more than one mortgage policy to cover your entire outstanding mortgage amounts. Some people have a top up policy if they have re-mortgaged or acquired another property. What you want to avoid is being over-insured and paying out to much in premiums.

Am I able to get mortgage life insurance without a credit check?

Yes, you will be able to get mortgage life insurance without the need for a credit check.

close up hands multitasking man using  laptop

Where can I get a quote for mortgage life insurance?

Our advisers can give you a quote for mortgage life insurance specific to your circumstances. We search the marketplace on your behalf.

Frequently asked questions relating to health conditions and medicals.

  • All insurers are different although generally, you will be able to get mortgage life insurance without a medical if you have:

    •  No pre-existing medical conditions
    • A low sum insured depending on your age (Insurers each have different thresholds)
    • No hazardous hobbies  
    • A non-hazardous occupation
    • No family history of medical conditions like cancer, or Motor neurone disease

     

    The main triggers for a medical examination are: sum insured, pre-existing medical conditions, BMI and recent long term travel to some countries.

  • If you have a disability, how it impacts your mortgage life insurance will depend on the nature of the disability. Our advisers will want to know:

    1. What is the disability?
    2. How does it affect day to day life?
    3. Have you taken any time off work?
    4. How long you have suffered from it?
    5. What is the severity of your condition?
    6. Do you take any medication, what and how much?

     

    From here, your Future Proof Adviser will contact the marketplace of insurers and find the most sympathetic to your disability. Hence, provide cover at the most agreeable cost.

  • Part of the Future Proof award-winning client service is to take a full fact find from you. From here we contact all insurers ahead of any application anonymously and get a feel for their opinion on a pre-existing condition. 

    In this way, we find the most sympathetic to your condition and narrow down those with the best offers of cover.  As advisers, we exhaust every avenue to find the cover you need within budget. Whilst we will make every endeavour to help someone to arrange insurance, there is no guarantee of success.  All applications are subject to underwriting.

  • If you have a critical illness it is unlikely that you will be offered mortgage protection owing to your circumstances.

    An insurer may wish to postpone an application. Until you have recovered and have been two or more years clear of the illness before reconsidering.

Will my policy pay off the entirety of my mortgage if I die?

Your policy will pay off the entirety of the mortgage when you die.

If you have matched the mortgage policy to the same amount and term as the outstanding mortgage.

What happens to my policy once I pay off my mortgage?

Once you pay off your mortgage, your mortgage policy will no longer be needed. If you have been lucky enough to have paid off your mortgage early, you can cancel the policy with no charges incurred. If you have matched the term of your policy to the term of your mortgage it will end at the same time. 

"*" indicates required fields

Fill in the form & we'll get back to you