Mortgage insurance (also known as decreasing term) offers a payout that decreases over time. It can be used to cover outstanding debts, for example your mortgage, if you die before they're paid off. It means your partner and/or dependants aren’t burdened with having to meet the mortgage repayments without your financial support.
Mortgage life insurance is specifically designed to cover outstanding debts if you die. Because the amount you owe on your mortgage decreases with time, the payout amount usually decreases in line with this too.
Level term life insurance is different. It pays out a fixed cash lump sum to your beneficiaries if you die at any point in the policy term. The payout doesn't decrease.
It depends on your circumstances. Often, people choose to get decreasing term life insurance alongside level term insurance. That way, any outstanding debt on the mortgage is covered and additional money is available as a payout to support loved ones too.
You can buy mortgage life insurance from your mortgage provider, estate agent or you can buy it direct from an insurer for yourself. When you buy a house, they'll ask you about it. However, the person selling you the policy will get a commission for each one sold. You’ll probably be able to find a more cost-effective and suitable product by shopping around and comparing your options first.
You might not need mortgage life insurance if you already have another life insurance policy in place that offers a sufficient payout to clear your mortgage debt. For example, your employer might offer death in service cover, and that's enough to cover your outstanding debts.
That been said, it's possible to have multiple life insurance policies - and in some circumstances this might be the right option. For example, if you want to make sure your mortgage is paid off and you want to leave a lump sum for your beneficiaries.
Mortgage life insurance isn’t compulsory
If you die with outstanding debt on your mortgage, it’ll be paid off from your estate if you don’t have insurance to cover it. So if you haven’t got dependants, or your estate has enough money to cover the cost, you might not need mortgage life insurance.
It could still be a good time to consider writing or updating a will. If you do decide you need mortgage live insurance, consider writing your policy in trust. This usually means your beneficiaries get a quicker payout. The payout should be exempt from inheritance tax too, depending on your circumstances.
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The various types of protection policy on offer can have similar, confusing names. But if you know the level of cover that you need, we can help you find the right policy.
With joint mortgage life insurance, if one partner dies, the other can get a payout.
It's usually cheaper than two people holding separate policies. That's because the cover ends after the first death - there's no payout if the second policyholder dies.
A level term life policy would pay out the same amount, no matter when you died during the cover period.
You set the amount of cover yourself, but if you die after the term ends, you won't receive a payout.
Also known as 'life assurance', whole of life cover does what it says on the tin - it covers you for life and pays out whenever you die. There isn't a specified term.
Some policies require you to keep paying premiums until you die, while others only ask that you pay until a certain age.
MPPI is a form of income protection that pays your monthly repayments if you’re unable to work due to accident sickness or redundancy.
Some income protection policies can offer a death benefit but products like that aren't typically designed to pay off your full mortgage debt with one lump sum.
This type of policy is designed to pay out if you are unable to work due to an accident or illness, or if you're made redundant.
There are both long and short-term policies available, however the payout will only cover a certain percentage of your wages.
This cover can be used to help your beneficiaries cover the cost of your income.
The main difference between family income benefit and standard life insurance is that it normally pays out monthly, rather than a lump sum.
It's worth comparing your options – switching providers could be to your advantage, but you also need to be careful. Life insurance is more expensive for older people or those with health conditions, so you’ll have to pay more if you're looking to arrange cover later in life.
For that reason, it's more common to keep your existing life insurance policy in place, and buy additional cover if your circumstances change.
Use our calculator to get an idea of how much life insurance might be right for you
You can’t compare mortgage life insurance with critical illness cover with us. But it’s possible to add critical illness cover to all types of life insurance, including decreasing term policies. Expect your premiums to go up if you add critical illness cover to a life insurance policy.
By comparing various providers and policies, until you find cover that suits your circumstances. Don't just pick the policy that offers the cheapest premiums though - make sure it'll actually cover what you need it to.
For comparing quotes online, Gocompare.com introduces customers to Neilson. Which is a trading name of Neilson Financial Services Limited who are authorised and regulated by the Financial Conduct Authority no. 594926. Gocompare.com's relationship with Neilson Financial Services Limited is limited to that of a business partnership, no common ownership or control exist between us.