Life Insurance for your Mortgage

Ensures your family needn't worry about repaying the mortgage if you die.

For most families, the monthly mortgage payments represent their single largest outgoing.

A Life Cover policy can repay the remaining mortgage balance if you die.

It's peace of mind for you and your family.

Do you really need Life Insurance for your Mortgage? Probably!

  • Without Life Cover for your Mortgage, your family's home could be at risk. If the worst should happen to you, it could mean the family is forced to sell their home – unless they have some other means of repaying the mortgage balance (or the mortgage is small enough to be covered by the remaining partner's income).
  • Remember that with one income gone forever, the amount of new mortgage that could be applied for would be greatly reduced… Perhaps even to the level which makes it impossible to purchase a new home.
  • A Life Insurance policy to cover your mortgage helps to make sure that, if the worst happens, your loved ones are protected and the family home is theirs. With no more mortgage payments to make, the family's monthly outgoings will also be significantly reduced.

Further information about Life Cover for your Mortgage

"...Lenders – without telling the customer – add their own markup of as much as 50% to the price available elsewhere.

"Even going direct to the insurer will, bizarrely, sometimes end up costing policyholders far more."

Source: Daily Telegraph, 8th September 2013 - read the full article

The simple answer is that you're free to do what you like.

  • The life insurance policy runs independently of the mortgage. You do not have to continue to have a mortgage in order to keep the life insurance policy running.
  • On the other hand, if you're sure you no longer wish to keep the policy going, you can stop the plan at any time. The insurance company will not charge you any penalty if you cancel the plan. Some brokers may charge you a penalty if you cancel your policy, but Moneysworth do not charge any cancellation penalties.

It's an option, but is it the best one?

It may be that you have enough life cover through your employer scheme to repay the mortgage. But before deciding to go down this route, you should consider the following:

  1. If you use the lump sum death benefit to pay off your mortgage, will your family be left with sufficient income to manage?
  2. If you change your employment during the mortgage you will lose the death in service benefit. How will your mortgage be covered then?
  3. If you apply for life cover at that point, it will probably be more expensive because you'll be older. But if you have a health condition or develop one before applying for life insurance this could increase the cost of the cover even further. In some cases, it may even become impossible to find.

So relying on your employer's death in service benefits as a means of covering your mortgage could still leave your family at risk if your circumstances change. The safest option is probably to make sure that you have a separate life insurance policy for your mortgage, that provides guaranteed cover irrespective of future changes to your health or your employment.

There are two types of Life Cover policies normally used to cover mortgages, each with important differences.

Level Life Insurance for your mortgage

With this type of cover, the amount of claim payable stays fixed at the same level throughout the policy. Normally this type of plan should be used for interest-only mortgages. However, there is no reason why you can't have this type of cover for a repayment mortgage.

Decreasing Life Insurance for your mortgage

This is the type of policy designed specifically for repayment mortgages (where you are paying back to the lender both capital and interest each month). The amount of cover starts off at the full mortgage amount and falls throughout the mortgage term. The reason it falls is because as time goes by and you repay the mortgage to your lender each month, the total amount owed to the lender also falls.

The example premiums below are based on non-smoker rates and were sourced on 1st Apr 2014

Individual cover - monthly premium examples:

Age Policy Type Cover Amount Term Monthly Premium
35 Decreasing Life Cover £150,000 25 yrs £7.89
35 Decreasing Life or Critical Illness £100,000 25 yrs £22.96
45 Decreasing Life Cover £150,000 25 yrs £15.60
45 Decreasing Life or Critical Illness £100,000 25 yrs £51.29

Joint cover - monthly premium examples:

Age Policy Type Cover Amount Term Monthly Premium
35 Decreasing Life Cover £100,000 30 yrs £10.48
35 Decreasing Life or Critical Illness £100,000 25 yrs £40.68
45 Decreasing Life Cover £100,000 30 yrs £22.52
45 Decreasing Life or Critical Illness £100,000 25 yrs £95.22

The above example premiums are for illustration purposes only. Any terms offered would be subject to underwriting.

If you have any health conditions, take a look at the Life Insurance for people with Health Conditions section.

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We don't charge you a fee

If you start a policy, we will be paid a commission by the insurance company. The insurance company will usually pay for any doctor's fees if reports are required.