What Type of Life Insurance Do I Need for an Interest-Only Mortgage?

If you want Life Insurance specifically to cover an interest-only mortgage, it’s usually best to take out level term Mortgage Life Cover.

With an interest-only mortgage, the outstanding amount on the loan remains fixed over time. As the level of debt remains fixed, so should the level of cover on your Life Insurance plan.

How Does Level Term Insurance Work?

With level term insurance, the amount of cover remains the same for the life of the policy, which is why it’s the most for covering an interest-only mortgage.

For example, if £200,000 of life cover is taken out at the start of the plan, the policy will still be valid for £200,000 until the end of the policy term.

This means that if you were to pass away at any point during the policy term the plan would pay out a lump-sum amount sufficient enough to repay the mortgage loan.

In contrast, decreasing term insurance where the level of cover declines over time, which is usually used to cover a repayment mortgage.

Getting Joint Life Cover For an Interest-Only Mortgage

With Level Term Life Cover it is possible to take out a joint life plan with your partner if you have a joint mortgage. It is also possible to take out Life Insurance with Critical Illness Cover to protect against the mortgage risk of suffering a serious illness or injury. Give us a call on 02084327333 or email help@drewberry.co.uk to speak to one of our friendly specialists.

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