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nigel woollsey

Nigel Woollsey

Online Writer
Published: 31/07/2019

At a glance

  • Life insurance for your mortgage is not compulsory – but it is highly recommended for most people.
  • Mortgage providers can insist you have life insurance in place, but they cannot force you to have their insurance.
  • Mortgage life insurance is designed to pay off the remainder of your mortgage should you die before you reach the end of your term.
  • Cost will depend on your level of cover, defined benefits, your age and medical history.

Buying your first home is an exciting and daunting experience. There seem to be so many things you need to remember (and pay for!) that it’s easy to get lost on what you really need and what is just a ‘nice to have’. Life insurance for mortgages is just one area where the inexperienced may feel unsure. To help, we’ve put together this quick guide on understanding your mortgage life insurance needs.

What is life insurance for mortgages?

Simply put, life insurance is a way of financially protecting your loved ones in the event of your death. However, there is a vast selection of life insurances available – some which simply cover the cost of a funeral and others that are designed to support your family financially should the worst happen.

Life insurance for mortgages is just that: an insurance policy that pays off the remainder of your mortgage in the event of your death. While life insurance for mortgages is not compulsory, it is strongly recommended for most people. Some mortgage lenders will actually insist you have this in place before you move in, while others will not. Building and contents insurance are separate insurances. You will be required by your mortgage provider to have buildings insurance, while it is strongly recommended to protect the contents of your home with a contents policy.

Why do I need life insurance for my mortgage?

For nearly everyone, buying a home is the single biggest financial commitment you will make. At the start of your mortgage, you will owe your mortgage lender for anything up to 100% of the purchase price for your home – most likely amounting to tens or hundreds of thousands of pounds.

With capital and interest mortgages, each month you pay off a little of your mortgage until, at the end of your mortgage term, you have repaid the lender and now own the property outright. However, what happens if you die before you pay off your mortgage? If you have a joint mortgage and die without life insurance in place to cover your mortgage then, the bank will look to your surviving mortgage partner to repay the remainder of the debt. This might be a problem say, if your surviving partner couldn’t afford the repayment on their own – forcing them to sell the house to pay off the debt.

Mortgage life insurance prevents this by paying off whatever remains of your mortgage debt if you die before the mortgage ends. With this in place, your loved ones are protected, and you can feel safe in the knowledge that your family will have one less thing to worry about.

Some life insurance policies will also pay off your mortgage debts while you are still alive if you are diagnosed with a terminal illness.

What type of mortgage life insurance do I need?

Single or joint – If you are buying a home on your own then you need only insure your life. However, since many people buy with a partner, it makes sense to have a joint life insurance policy that will repay the mortgage should anything happen to either of you.

Decreasing or level – With a repayment mortgage, as time passes, the amount you owe on your mortgage will decrease as you make repayments. Therefore, you won’t need as much cover as time progresses. A policy that takes this into account is called decreasing term life insurance – and is often cheaper than your other choice: level term assurance. The amount to be paid out for level term assurance does not go down in time but stays the same for the duration of your period of cover. Level term assurance is the correct type of cover if you have an interest only mortgage. Therefore, your family may also gain a lump sum depending on how much of your mortgage needs to be paid off. At the start of the policy this is likely to be minimal, but a pay-out after several years of repaying your mortgage could be much larger. This is a good choice if you have no other life insurances in place or want a lump sum for your family if the worst comes to the worst.

What is critical illness mortgage cover?

Some life insurance policies also offer something called, ‘critical illness’ cover. This is an additional benefit that pays you a tax-free lump sum some should you fall ill with a defined critical illness, such as cancer, a heart attack or a stroke. It’s likely you may also be covered for a range of other serious illnesses too, but these can vary from provider to provider. This type of policy is useful if, for example, your family would struggle without your earnings if you fell ill and were unable to work.


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Where can I buy my mortgage life insurance?

As with so many things, it’s important to shop around and find the right cover and price for you. Some mortgage brokers or other intermediaries may well offer to arrange insurances for you but you may find a better deal by using comparison websites or seeing an independent financial adviser.


Key features

Find out more

Post Office Life Insurance


  • You can pay from just £7 per month for our life insurance or pay more and get up to £500,000 of cover
  • Choose Level, Decreasing or Increasing cover to suit your lifestyle and budget
  • We include Terminal Illness Cover at no additional cost and pay out early if you're diagnosed with a terminal illness that meets our definition
  • Pay more each month to add Critical Illness Cover to your policy


Aviva Life Insurance


  • With 98.6% of claims paid, you can count on Aviva
  • Choose how long you’d like your cover to last, anywhere from 1 to 50 years
  • Most customers get a quote and decision in just over 5 minutes
  • Cover pays out a cash lump sum if you pass away or are diagnosed with a terminal illness where you’re not expected to live longer than 12 months.
  • House purchase cover - If you’re taking out life insurance to coincide with the purchase of a new house, we’ll give you up to 90 days free life insurance. The free cover begins when we’ve accepted your application and you’ve exchanged contracts/completed missives, as long as you’ve given us a future start date that coincides with the completion of your house purchase. Terms apply. See policy summary for full details



Do I have to take out life insurance through my mortgage provider?

No. You are perfectly within your rights to go elsewhere. Again, going with a mortgage provider’s policy often means paying more than you need to. However, your provider has the right to demand that you have the appropriate life insurance in place before the mortgage starts.

How much will my mortgage life insurance cost?

How much you pay each month depends very much on:

  • The type of policy you choose and it’s defined benefits
  • Your age
  • Your medical history and lifestyle.

Pros and cons of mortgage life insurance

  • Peace of mind knowing that your mortgage will be paid off in full in the event of your death.
  • Additional cover and ‘bolt-ons’ can add further benefits such as critical illness cover to enhance the protection for your family.
  • Relatively inexpensive – especially for younger applicants.
  • Numerous policies and providers mean you have a great range of choice.
  • Depending on your age and medical history, you might have to pay more than someone else for the same level of cover.
  • This type of insurance will not cover you in the event you are made redundant.

Moneyfacts tip

Moneyfacts tip nigel woollsey

Never be afraid to shop around for life insurance – especially if you are older or have an adverse medical history. There are even some specialist insurers who may offer you better cover than a more mainstream insurance company.

Disclaimer: This information is intended solely to provide guidance and is not financial advice. Moneyfacts will not be liable for any loss arising from your use or reliance on this information. If you are in any doubt, Moneyfacts recommends you obtain independent financial advice.

person holding model house

At a glance

  • Life insurance for your mortgage is not compulsory – but it is highly recommended for most people.
  • Mortgage providers can insist you have life insurance in place, but they cannot force you to have their insurance.
  • Mortgage life insurance is designed to pay off the remainder of your mortgage should you die before you reach the end of your term.
  • Cost will depend on your level of cover, defined benefits, your age and medical history.

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