Cover arranged to match your mortgage
For most households the mortgage is the largest commitment they take on, and it's the one that keeps a roof over everyone's heads. Mortgage protection is life insurance set up to match it, so that if you die during the term the balance can be cleared rather than left with your family.
It's a straightforward idea, but there are a few decisions inside it that make a real difference to what your family ends up with.
Decreasing or level
Decreasing term assurance
Decreasing term assurance is the option most often used alongside a repayment mortgage. The sum assured reduces over the term, broadly tracking the outstanding balance as it falls.
Because the insurer's liability reduces too, premiums tend to be lower than level cover for the same starting amount.
Level term assurance
Level term assurance keeps the sum assured fixed for the whole term. It's generally the better fit for an interest-only mortgage, where the balance isn't reducing.
It can also suit anyone who'd prefer a surplus left over rather than an amount that only just clears the debt.
There isn't a single right answer
A decreasing policy is usually the more economical way to cover the debt itself; a level policy costs more but leaves something behind.
Adding critical illness cover
Mortgage life cover pays out on death. Adding critical illness cover means the policy could also pay out if you're diagnosed with one of the conditions listed in the terms and meet the definition set out in the policy.
For many people during a 25-year mortgage term, serious illness is the more likely event of the two — which is why it's worth pricing both and making an informed choice rather than defaulting to life cover alone.
Definitions vary between insurers
Critical illness cover only applies to conditions and definitions specified in the policy terms. Our critical illness page goes into what's covered and how definitions vary between insurers.
Read about Critical Illness Cover →Joint or two single policies
On a joint mortgage this is worth pausing on. A joint policy will typically pay out once, on the first death or qualifying claim, and then end.
Two single policies usually cost a little more, but each can pay out in its own right, and they stay with each person if circumstances change later.
Joint policy
Typically pays out once, on the first death or qualifying claim, after which the policy ends.
Two single policies
Usually cost a little more, but each policy can pay out in its own right and remains attached to the individual if circumstances change.
Setting the term and the amount
Cover is normally arranged to run for at least as long as the mortgage, with the sum assured based on the current balance.
A few things worth thinking about:
- Whether the mortgage is repayment or interest only, which drives the decreasing versus level decision.
- Any death-in-service benefit from your employer, which can often be less than people assume and isn't portable if you change jobs.
- Whether cover should extend beyond the mortgage to replace income more broadly — see our life insurance and income protection pages.
- What's affordable on an ongoing basis, since cover you can't sustain may not be there when it's needed.
Writing the policy in trust
Worth considering in most cases. A policy held in trust will often pay out more quickly, goes to the people you intended, and in most circumstances sits outside your estate for inheritance tax.
Consider it at the outset
There's usually no cost to arranging it at outset, and it can be harder to put in place later.
We'll talk you through whether it's appropriate for you.
No obligation to buy from your lender
Buildings insurance is normally a condition of the mortgage. Life cover usually isn't, and no lender can require you to take protection from them.
You're free to arrange it wherever you choose, and it's worth comparing.
Compare your options
Mortgage protection does not have to come from the lender providing your mortgage.
Review it when the mortgage changes
Cover arranged ten years ago may no longer match the mortgage it was taken out for, particularly after a move, a remortgage, further borrowing or a change in household income.
Mortgage changes can mean protection changes
It's worth reviewing the policy after a move, remortgage, further borrowing or a significant change in household income.
Make sure the protection matches the mortgage
The right type of cover, term and amount should reflect the mortgage you have and what you want to happen if something goes wrong.
We'll help you look at the options and arrange cover around your circumstances.
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