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Joint Mortgage Life Insurance

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Joint Mortgage Life Insurance is generally used when two people (usually but not always spouses) purchase a home together. It’s used to pay off the outstanding mortgage debt should either person die.

  • A tax-free cash lump sum is paid out to the surviving partner should one half of the couple pass away. The surviving partner then uses these funds to pay off the outstanding mortgage.
  • It provides you with the peace of mind that comes from knowing both you and your partner could remain in your home should the worst happen to either of you.
  • The vast majority of policies include Terminal Illness Benefit, which pays out the lump sum early if you’re diagnosed as having fewer than 12 months to live.
  • You can opt to include Critical Illness Insurance for further protection against serious illnesses as well as death.

There are many factors to consider with Couples Life Insurance, including whether you need Level Life Insurance or Decreasing Life Insurance and if you’d benefit from writing the policy into trust.

What Does Joint Mortgage Life Insurance Cover?

Joint Life Insurance covers the death of one of the policyholders. It’s usually on a joint life, first death basis, which means after one person has died the survivor receives a lump sum from the insurance plan. At that point, the policy ends.

In addition to covering the death of the policy holder, many policies automatically include Terminal Illness Benefit.

Rather than paying out when you pass away, Life Insurance with Terminal Illness Benefit will pay out early if you’re diagnosed with less than 12 months left to live (subject to certain conditions).

With a joint policy, both you and the other person will receive the same amount of cover, so if either of you should become terminally ill or die, the policy would pay out the agreed sum to the survivor.

Including Critical Illness Cover

While Life Insurance will pay out on death you have no protection should either person suffer a serious illness.

You can choose to add Critical Illness Insurance to your policy which will pay out a claim should either person be diagnosed with a critical illness as defined in the policy terms. The most commonly covered conditions include:

  • Cancer
  • Heart Attack
  • Strokes
  • Multiple Sclerosis
  • Motor Neurone Disease
  • Loss of Limbs
  • Permanent Loss of Vision

When comparing Critical Illness Insurers it is important to recognise that the number of conditions covered and the definitions they use can vary considerably from one insurer to the next. We have tools in house which rank the quality of the critical illness definitions used to ensure you can make an informed decision when it comes to choosing a policy.

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Do We Need Joint Mortgage Life Insurance?

If you own a property with another person and both contribute to mortgage payments, there may come a time when you need to make the payments on your own, whether this be due to accident, sickness or even death. Could you do so?

If you are thinking you may struggle to meet your mortgage loan repayments on your own it may be time you consider Joint Mortgage Life Insurance.

The Risk of Passing Away…

Using Office for National Statistics mortality data, we’ve put together a Life Expectancy Calculator that can work out the risk of you passing away during the term of your mortgage.

We’ve laid out this risk for a healthy male of three different ages over the course of a 25 year mortgage, highlighting the chances of them dying before the mortgage is repaid.

Age 25

Age 35

Age 45

1 in 18

1 in 8

1 in 4

How Does Joint Mortgage Insurance Work?

Firstly, you should consider what you need the plan to protect to ensure you source adequate cover…

  • How long do you need to be covered for?
  • How much cover do you need?
  • Do you want to provide any additional cover beyond the mortgage?
  • Are you protecting an interest-only or repayment mortgage?
  • Do you want to extend the cover to protect against serious illnesses?

Compare Joint Life Insurance Quotes

After deciding on the ins and outs of the policy, you’ll need to compare Mortgage Life Insurance quotes from across the UK market to find the best deal.

Obviously this will take a lot of time – time most people don’t have. To make life easier we have built a Mortgage Insurance quote engine which compares the best 10 UK Insurers. Couple the quote comparison with our expert advice and you can’t go far wrong.

Michael Barrow
Independent Protection Expert at Drewberry

You can buy Mortgage Life Insurance without the help of an expert but at Drewberry you get access to our 5-star independent service at no additional cost – the monthly premium will be the same as going direct.

Applying for Your Mortgage Protection

When setting up your Joint Mortgage Protection there are some essential details you and your partner will need to provide. These include:

  • Occupation and employment status
  • Date of birth
  • Your smoking status
  • Your current state of health / medical history
  • Your outstanding mortgage balance and the type of mortgage you have
  • The amount of cover you need
  • How long you need the cover for.

Level or Decreasing Joint Mortgage Life Insurance?

One thing that you need to look out for on your Life Insurance policy is the type of cover you need. Mortgage Life Insurance is split into Level and Decreasing cover – both are very different.

Whether you need Level Term Mortgage Insurance or Decreasing Term Mortgage Insurance depends on your mortgage and your circumstances.

Level Term Life Cover

If you have an interest-only mortgage, Level Term Life Insurance may be the best policy option for you. With this type of cover, the size of your payout won’t change for the entire length of your cover.

For this reason, Level Term Mortgage Insurance tends to be the more expensive Mortgage Insurance option.

However, it’s necessary for an interest-only mortgage as the principal capital isn’t declining over time.

Sometimes, people with a repayment mortgage also opt for Level Mortgage Life Insurance to leave a sum over and above what’s left on the mortgage.

Decreasing Mortgage Life Insurance

Decreasing Term Life Insurance is generally better suited for people with a capital / principal repayment mortgage.

This type of cover works by tapering down over time to match the declining outstanding balance of your mortgage as you continue to pay it off. Eventually, when your mortgage has been paid off in full, the cover that you are entitled to reaches zero and the policy ends.

Should I Add Joint Critical Illness Insurance?

You have the opportunity to add Critical Illness Cover to a Joint Life Insurance policy to ensure you and your partner will also receive a payout if you become critically ill.

With this type of cover, your policy would pay out a lump sum that can be used to repay your mortgage in the event of a critical illness such as a heart attack, cancer or stroke as specified in the insurer’s terms and conditions.

What Does Joint Critical Illness Insurance Cover?

The serious illnesses which are covered by the plan are outlined by your insurer in the policy wording.

Not every insurer is going to offer the same level of cover and the illness definition which results in a successful claim can vary significantly from one insurer.

Given the significant variation in the quality of cover it is so important to receive independent expert advice to ensure you are getting the most comprehensive cover for your monthly premium.

Critical Illness policies cover an average of around 40 conditions, although some have more than 100 illnesses and conditions listed under the policy’s terms and conditions.

Important information on Less Severe Critical Illnesses…

One issue with Critical Illness Cover is that ‘less severe’ cases of illnesses (e.g. low-grade, in situ skin cancer) may not be covered in the policy.

Also, if you have any pre-existing medical conditions, your insurer may load your policy (charge a higher monthly premium) to reflect the enhanced risk you present, or exclude that condition from the Critical Illness element of the policy.

Do I Need Critical Illness Insurance and Mortgage Life Insurance?

Adding Critical Illness Insurance to your mortgage protection can be valuable and combining such cover with your Life Insurance is often cheaper than buying cover separately.

However, it does have some limitations. One of the biggest limitations is that the policy will only pay out once – on the first death or diagnosis of critical illness. After that, your policy will have played its part and will be over.

Even if one of you has a critical illness and survives, you’ll both be left without any life cover or further Critical Illness Cover.

At that point in time, reapplying for Life Insurance or Critical Illness Cover when you’re older can be a lot more expensive, especially for the person who’s suffered a critical illness where only limited cover if any may be available.

Purchasing Critical Illness Insurance independent of your Joint Mortgage Life Insurance would allow you to claim for a critical illness without losing the life insurance cover for your mortgage.

Although this may work out more expensive you do secure more cover for your money at an age when you can fix lower premiums.

Guaranteed or Reviewable Life Insurance Premiums?

There are two different types of premiums that you’ll need to consider when looking at Mortgage Life Insurance: guaranteed premiums and reviewable premiums.

Before you start looking seriously at such policies, you need to choose your premiums type.

  • Guaranteed premiums
    The monthly premiums are fixed in price until the end of your cover
  • Reviewable premiums
    The insurer is entitled to review your premiums annually and may adjust the price as they see fit, although there’s no fixed metric that will determine what this price rise might be.

Typically, reviewable premiums rise based on factors outside of your control, such as the likelihood of you making a claim, changes in tax rules, volume and value of claims the insurer has paid that year and interest rates.

The best premium option for you will depend on your situation. Guaranteed premiums may be particularly attractive if you’re young and healthy when you take out the policy. This is because you can lock in favourable premiums throughout the length of your policy.

Reviewable premiums, on the other hand, are cheaper at the start of the policy but tend to rise later on. They may match the starting price for guaranteed premiums before the end of the policy and then even rise beyond that price.

Making a Claim on Joint Life Insurance

If one of the people named on the Joint Mortgage Life Insurance policy passes away then the surviving person will need to make a claim.

They will need the original policy documents, a claim form and a death certificate to give to the insurer. As your financial adviser we offer help and support through this process to ensure the everything runs as smoothly as possible.

The insurer is entitled to ask for an original death certificate. Death certificates can be obtained from various places, depending on if the person’s death is in:

Receiving the Life Insurance Payout and Repaying the Mortgage

The insurer will most likely pay a claim within a maximum of a few weeks of receiving all the relevant documentation. So long as adequate cover was put in place when the plan was set up the amount that the insurer will pay out should at least align with the outstanding mortgage debt.

If the policy was written in trust, the insurer would pay it directly to the trust where it would then be distributed to the beneficiary. Regardless of the circumstances the benefit would not be affected by inheritance tax.

If your Joint Life Insurance policy was not written in trust, the payout will form part of the deceased’s estate. When this happens, the estate’s executors will be in charge of delivering it to the intended people.

This is a legal process known as probate and can take up to 6 months to complete. If the person did not have a will, this can take even longer.

If the partner on your policy is your spouse, then the insurance payout will reach them without being affected by tax.

Should We Write Our Joint Mortgage Life Insurance in Trust?

Given that most policies are set up for two spouses and there’s no inheritance tax to pay on transfers between spouses, inheritance tax tends to be less of an issue for Joint Mortgage Life Insurance.

Problems may arise if the couple isn’t married, as there’s no protection on transfers between unmarried couples on death.

Joint Mortgage Life Insurance Trusts for Tenants in Common

Furthermore, while the outstanding mortgage debt is usually deducted from the estate when calculating its size for IHT, this may not be the case if you own your home as tenants in common.

As opposed to joint tenants, where you both effectively own the entire house, tenants in common allows you to own a set percentage of the home each.

If you own your home as tenants in common (say 50/50) with a joint mortgage and have Joint Mortgage Life Insurance, HMRC may only consider 50% of the debt belonging to the deceased.

That would mean the whole debt couldn’t be deducted from the value of the deceased’s estate, which would include a Life Insurance policy large enough to cover 100% of the mortgage.

samatha haffenden-angear, independent protection expert at drewberry

This is where you may benefit from writing your policy into trust – speak to one of Drewberry’s experts to determine whether this is best for your Mortgage Life Insurance.

Samantha Haffenden-Angear
Independent Protection Expert at Drewberry

Single or Joint Mortgage Life Insurance?

If you’re a couple who own a home together, you have the option of purchasing two single policies instead of Joint Mortgage Life Insurance.

Both options have pros and cons that make them better suited to certain people’s circumstances. Joint Life Insurance policies may work out cheaper at the start and might be easier to manage (in that there’s one policy rather than two).

However, two single Life Insurance policies may be more flexible and offer increased level of cover for both people.

Single vs Joint Mortgage Life Insurance

Joint Life First Death Insurance policies will only ever pay out once, but if you only need the payout to cover the mortgage and don’t require additional Life Insurance, then there’s less need to buy two policies.

On the other hand, if you’re a young family with children who you would like to ensure are financially secure should something happen, two Single Mortgage Life Insurance policies may be better.

This will ensure that your mortgage is paid for in case of the first death and allow the second parent to leave some money behind for dependants in the event of their death.

This is particularly important if you both should tragically die at the same time – with a joint policy, you’d only get one payout even in this example.

To find out whether you would benefit more from a joint or two single policies feel free to ask our insurance advisers today. It is often the case that two single policies may only cost 15-20%% more in premium but will provide you with twice the level of cover.

How Much Does Joint Mortgage Insurance Cost?

The cost of Couples Mortgage Insurance will depend on a variety of personal and policy factors, such as:

  • How long you need cover for
    The older you are at the end of the policy, the higher the risk of a claim and so the higher the price
  • The age of the oldest person to be covered
    With Joint Life Cover, risk is priced based on the oldest individual to be insured
  • Optional additions
    Adding Critical Illness Cover to your policy, for instance, will significantly increase the cost of your cover (but will notably increase the breadth of your coverage)
  • Your smoker status
    Smoking shortens life expectancy, so smokers are charged more for Life Insurance to compensate for the enhanced risk that they’ll claim
  • Your medical history
    Pre-existing, current or past health conditions may have an impact on the cost of your cover, with the potential for your policy to be ‘rated’ or ‘loaded’ depending on the condition and the insurer.

The table below provides an illustration of the cost of Life Insurance for partners of the same age. We’ve included the cost of a joint policy and the cost of two separate policies, one on each half of the couple, so you can compare couples Life Insurance based on this.

For the purposes of this illustration, which was carried out on March 12, 2019, we’ve assumed:

  • Both halves of the couple are of the same age
  • They’re looking for a £300,000 decreasing policy across 25 years
  • They’re non-smokers
  • There is no untoward medical history to speak of
  • They don’t want any Critical Illness Cover.

Age

One Joint Policy

Two Single Policies

Price Difference

25

£10.96

£12.90

+17.7%

35

£17.38

£20.42

+17.5%

45

£37.74

£42.46

+12.5%

As you can see, for just a few extra pounds each month you could potentially secure two single policies covering £600,000 that would pay out on each individual’s death rather than paying out £300,000 once as would be the case with a joint policy.

Compare Best UK Mortgage Life Insurance

Some of the top UK Life Insurance companies on the market today include:

  • Aegon
  • AIG
  • Aviva
  • Guardian
  • Legal & General
  • Liverpool Victoria
  • Royal London
  • Scottish Widows
  • Vitality
  • Zurich.

Of course, there a number of factors you should look at when comparing Life Insurance companies to find out which one is the best for you.

Most life insurers, like all insurers, publish their policy documents on their website, so you can see the level of cover you might be getting if you chose them.

We’ve provided a brief summary of the cover offered by the UK’s leading Life Insurance companies in the table below, but for more detail it always pays to check the policy wording carefully.

aegon

Aegon

Aegon’s Scotland-based UK operations are wholly owned and operated by Dutch insurer Aegon N.V.

  • Minimum entry age: 18
  • Maximum entry age: 89
  • Minimum term: 1 year
  • Maximum term: 50 years (cover must end before an individual’s 90th birthday)
  • Maximum cover: Unlimited
aig

AIG

US insurance giant American International Group, Inc. (AIG) was first founded in 1919 and since then has grown to operate on a global scale. It provides a range of protection products for both individuals and businesses.

  • Minimum entry age: 18
  • Maximum entry age: 88
  • Minimum term: 2 years
  • Maximum term: 70 years (cover must end before an individual’s 90th birthday)
  • Maximum cover: Unlimited

 

aviva

Aviva

Aviva was founded in 1797, but the Aviva brand as it is today was formed in 2000 by the merger of Norwich Union and CGU PLC.

  • Minimum entry age: 18
  • Maximum entry age: 89
  • Minimum term: 1 year
  • Maximum term: 50 years (cover must end before an individual’s 90th birthday)
  • Maximum cover: Unlimited
guardian

Guardian

Guardian is a relaunched protection brand with a number of unique features to its policies.

  • Minimum entry age: 18
  • Maximum entry age: 65
  • Minimum term: 1 year (Level and Increasing Cover) / 5 years (Decreasing cover)
  • Maximum term: 72 years (cover must end before an individual’s 90th birthday)
  • Maximum cover: £15 million
legal & general

Legal & General

L&G was formed as an insurance company for lawyers, by lawyers in 1836. It has since grown to become one of the country’s best-known financial services companies

  • Minimum entry age: 18
  • Maximum entry age: 77
  • Minimum term: 1 year (Level Cover) / 5 years (Decreasing cover)
  • Maximum term: 50 years (cover must end before an individual’s 90th birthday)
  • Maximum cover: Unlimited
liverpool victoria

Liverpool Victoria

LV is the UK’s largest friendly society, with more than 5.8 million customers, 1.1 million of whom are members.

  • Minimum entry age: 17
  • Maximum entry age: 79 (Level or Decreasing cover) / 59 (inflation-linked cover)
  • Minimum term: 5 years
  • Maximum term: 45 years
  • Maximum cover: Unlimited
royal london

Royal London

Royal London previously operated Scottish Provident and Bright Grey as separate brands providing Critical Illness Insurance under the Royal London umbrella. From 2016, both were merged into the main Royal London brand.

  • Minimum entry age: 18
  • Maximum entry age: 70
  • Minimum term: 1 year
  • Maximum term: 72 years
  • Maximum cover: Unlimited
scottish widows

Scottish Widows

Founded in 1812, Scottish Widows is today part of Lloyds Banking Group.

  • Minimum entry age: 18
  • Maximum entry age: 79 (must end before individual’s 90th birthday)
  • Minimum term: 1 year (Level and Increasing) / 3 years (Decreasing)
  • Maximum term: 72 years
  • Maximum cover: £25,000,000 (Level and Decreasing) / £15,000,000 (Increasing)
Vitality

Vitality

Vitality entered the UK market in 2007 with a joint venture with PruHealth and PruProtect, part of the Prudential Group. It has since bought out Prudential and is now branded solely as Vitality.

  • Minimum entry age: 16
  • Maximum entry age: 74 (cover must end before age 90)
  • Minimum term: 5 years
  • Maximum term: No maximum (cover must end before age 90)
  • Maximum cover: £20,000,000
zurich

Zurich

Zurich is a Swiss-based global insurance giant, operating in more than 170 countries. It employs around 55,000 employees worldwide, including 4,500 in the UK.

  • Minimum entry age: 16
  • Maximum entry age: 83 (must end before individual’s 90th birthday)
  • Minimum term: 1 year
  • Maximum term: 50 years
  • Maximum cover: £40 million

Joint Mortgage Life Insurance Advice

If you need advice or would like to know more about how to get the right policy, don’t hesitate to contact Drewberry’s friendly team of financial advisers.

Why Speak to Us…

We started Drewberry because we were tired of being treated like a number and not getting the service we all deserve when it comes to things as important as protecting our health and our finances. Below are just a few reasons why it makes sense to let us help.

  • There is no fee for our service
  • We are independent and impartial
    Drewberry isn’t tied to any insurance company, so we can provide completely impartial advice to make sure you get the most appropriate policy based solely on your needs.
  • We’ve got bargaining power on our side
    This allows us to negotiate better premiums for you than you going direct yourself.
  • You’ll speak to a dedicated expert from start to finish
    You will speak to a named expert with a direct telephone and email. No more automated machines and no more being sent from pillar to post – you’ll have someone to speak to who knows you.
  • Benefit from our 5-star service
    We pride ourselves on providing a 5-star service, as can be seen from our 2198 and growing independent client reviews rating us at 4.92 / 5.
  • Gain the protection of regulated advice
    You are protected. Where we provide a regulated advice service we are responsible for the policy we set-up for you. Doing it yourself or going direct to an insurer won’t provide this protection, so you won’t benefit from these securities.
  • Claims support when you need it the most
    You have support should you need to make a claim. The most important thing when it comes to insurance is that claims are paid and quickly. We are here to support you during the claims process and make sure it’s as smooth and stress free as possible.
Tom Conner Director at Drewberry

Before setting up your Mortgage Insurance it is best to understand what options are available.

We are here to help, please do not hesitate to pop us a call on 02084327333 or email help@drewberry.co.uk.

Tom Conner
Director at Drewberry

Great service. Cannot recommend highly enough.

Kirsty Bain
17/04/2019
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