Answered by Andrew Jenkinson
The most common type of life insurance taken out to cover a mortgage is called term insurance. As the name suggests, term life insurance runs for a specific ‘term length’ and then the policy ends.
How term life insurance works
The term length is often set so that it matches the length of time you have left outstanding on your mortgage. Thus, if you were to pass away during the term of the mortgage your life insurance policy would payout and your family would have the funds to repay the loan.
Level term vs decreasing term insurance
Term insurance comes in two forms: level term insurance and decreasing term insurance. The former is often used to cover an interest only mortgage as the amount of cover remains fixed over the life of the policy.
With the latter, decreasing term life insurance, the amount of cover declines over the term of the policy. This happens because the amount of debt outstanding on a repayment mortgage also declines over time as the principal is repaid.
For more information please see our mortgage life insurance guide.
With both policy types it is possible to have a joint plan with your partner and include critical illness cover to protect against the risk of serious illness or injury.
Frequently Asked Mortgage Protection Insurance Questions
Excellent service at convenient times of the day specified by me. All product options were clearly outlined and I am very pleased.
First class service. Helped me through the process from start to finish. Egle and Francis were very professional and talked me though all my options. Once the policies were set up, the after care after was also first class. Highly recommend. 5 stars all day long.
Victoria was very helpful about selection of suitable insurance. She always answered all questions in a timely manner.