What is Joint Mortgage Insurance?
Joint life cover is designed to pay out a cash lump sum to the surviving partner to pay off the outstanding mortgage.
Provides you with peace of mind knowing your partner could remain in their home should the worst happen.
Optional Critical Illness Cover can be added to your Life Insurance to pay out should either of you develop a serious illness.
11.2% of deaths in the UK in 2016 were people aged between 20-60 years old. ONS 2016
Speak to our expert advisers or get an instant online quote comparing the UK’s leading insurers.
What Does Joint Life Insurance Cover?
Joint Mortgage Life Insurance covers two people under a single policy, if one of the people on the insurance plan dies, the policy will pay out a lump sum to the other partner to cover the remaining cost of their mortgage.
Including Critical Illness Insurance
If you decide to add Critical Illness Cover to your joint life insurance, then it will also pay out if one of the partners on the plan suffers a serious illness such as cancer, heart attack or stroke.
After the insurance policy has paid out – either for death or for critical illness – the cover will terminate meaning the surviving partner will no longer have any protection. This is why we often recommend setting up two single life policies.
How Does Joint Life Insurance Work?
- Find and compare policies
- Apply for the best policy and start paying your monthly premiums
- One of the people covered by the policy passes away
- The remaining partner files for a claim and supplies evidence of the person’s death in the form of a death certificate
- The insurance company pays out a lump sum to the partner, or places it into a trust
- The partner uses the insurance policy’s payout to pay off the remaining mortgage debt
- Your mortgage insurance terminates
Why Do I Need Mortgage 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?
- As of 2017, an average of 49 mortgage possession claims and 27 possession orders are made every day.
- 58% of people receive 3 months or less in sick pay from their employers; 24% don’t receive any sick pay at all
- The average UK family would need to cut their monthly spending by 48% in order to live off of Employment and Support Allowance
If you are thinking you may struggle paying your mortgage loan repayments on your own it maybe time you consider joint mortgage life insurance.
What an Expert Adviser Can Do For You...
Talk you through it
If you don’t know a lot about mortgage insurance policies then our advisers will explain to you everything there is to know and help you figure out what kind of policy you need.
Research and Report
Our online mortgage life insurance quote engine compares policies from the Best 10 UK providers and we couple this online service with expert advisers who are at the end of the phone ready to talk you through the most suitable options.
Getting it right
We will help you put together all of the information you need to get accurate quotes and apply for your plan. We will also help you with your application when you have found the insurance plan that’s right for you as well as providing ongoing support whilst your policy is in force.
- What is Mortgage Life Insurance?
- How Does Joint Mortgage Life Cover Work?
- What Does Joint Mortgage Life Insurance Cover?
- Mortgage Life Insurance Options
- Do We Need Joint Mortgage Cover?
- What is Joint Critical Illness Cover?
- Joint or Single Mortgage Life Insurance?
- Important Things to Consider
- Joint Mortgage Life Advice
Content Manager at Drewberry
What is Mortgage Life Insurance?
Mortgage Life Insurance is designed to cover the cost of your mortgage if you pass away. On the death of the policyholder it will pay out a lump sum that can be used to pay off the remaining mortgage debt.
Potentially, this could allow your loved ones to stay in the family home mortgage-free, particularly if they wouldn’t have been able to afford the mortgage repayments without your input.
Mortgage Life Insurance is sometimes known as Term Life Insurance because the cover lasts for a set term – usually the same as your mortgage.
What is Joint Mortgage Life Insurance?
Joint Mortgage Life Insurance works in the same way as if you’d bought insurance as an individual. However, instead of insuring just one life for the outstanding mortgage balance it protects two people under one policy.
Joint Life Insurance is usually written on a joint life, first death basis. This means that it will pay out on the first event should either policy holder die, the policy then pays out a cash lump sum to the surviving person and terminates.
How Does Joint Mortgage Term Insurance Work?
Work Out What You Need from a Joint Mortgage Insurance
Firstly, you should consider what you need you the plan to protect to ensure you source adequate cover…
- How long you need cover for
- How much cover you need
- If you want to cover just your mortgage or leave something more
- If you need level or decreasing cover (see below)
- If you should add Critical Illness Cover (see below)
Compare Joint Life Insurance Quotes
There are a few different ways for you to compare quotes. Your first option would be to collect quotes from each insurer directly and compare them yourself. 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.
Independent Protection Expert at Drewberry
You can buy Mortgage Life Insurance without the help of an expert but at Drewberry you have access to our 5 star independent service at no additional cost and the monthly premium for your policy is 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
Our expert advisers are on hand to answer any questions and make sure you take out the most appropriate cover. We are here to help you through the application and where appropriate set-up your cover in the most appropriate trust.
Independent Protection Expert
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:
- England and Wales (contact the General Register Office)
- Scotland – (contact National Records of Scotland)
- Northern Ireland – (contact NIDirect).
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 beneficiary and regardless of the circumstances it 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.
If you are not married or if both partners on the policy die and the payout goes to your children, then the payout may be taxed and the policy’s beneficiaries could end up with a significant IHT liability.
Josh at Drewberry was extremely helpful and friendly in answering my many questions about the policy before I went ahead.
What Does Joint Mortgage Life Insurance Cover?
Joint Life Insurance covers the death of one of the policy holders. As mentioned, 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.
What isn’t Covered by Mortgage Life Cover?
There are some common exclusions on a Joint Life Insurance plan, the circumstances under which you won’t be able to claim include:
- If the deceased committed suicide within the first 12 months of the policy start date (note some insurers apply a 24 month period)
- If the deceased did not disclose an existing medical condition or hazardous activity (e.g. cave/wreck/free diving) on their application
- If the death was caused by the misuse of drugs or alcohol
- If the death was because of any other policy exclusions.
It’s important that you always read the small print of your policy so you know exactly what is covered. Sometimes the language can be hard to follow, which is why it often pays to have an expert on hand. We know the terms and conditions inside out, so you can ask us as many questions as you like!
Independent Protection Expert at Drewberry
Joint Mortgage Life Cover Options
You have a number of different options to consider which may affect the cost of the policy, but could be necessary adjustments due to your circumstances and the type of mortgage you have.
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 – 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.
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 premium price increases are based on factors outside of your control, such as the likelihood of you making a claim, changes in tax, volume and value of claims the insurer has paid that year and interest rates.
Should I choose reviewable or guaranteed premiums for Mortgage Life Insurance?
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.
Those expecting to earn more in their later years may be more attracted to reviewable premiums, as they’ll be better able to afford the potentially higher costs later in life.
Do We Need Joint Mortgage Life Insurance?
A mortgage can be a lifetime commitment. Couples that purchase a property and pay off a mortgage together often depend on each other financially.
If one person were to pass away, there is a big question of whether the other person could afford to cover the mortgage payments on their own in addition to all the other expenses they used to share.
- 2 out of 5 adults in the UK have less than £1,000 in cash savings – far below what would be necessary to continue mortgage payments, let alone repay the whole loan
- 1 in 4 Brits still have mortgages worth at least £100,000
- On average, 14 properties are repossessed each day (as of July 2017)
- In May 2017, the UK owed a combined £1.34 trillion in outstanding mortgages.
That is why Joint Mortgage Life Insurance is such a valuable protection product. If one person paying the mortgage were to pass away, then the other person would have a means of at least paying off the mortgage.
That way they could stay living in the home during such difficult times and continue to manage financially.
When Should We Start Thinking About Life Insurance?
There is no perfect time to begin looking at Life Insurance policies, but it makes sense for you to start looking while you’re as young and healthy as possible. This will dramatically increase your chances of finding reasonably-priced cover which, with guaranteed premiums, you could potentially lock in for life.
If you have children with your partner and a considerable mortgage that either partner could not afford on their own it may be worth considering joint mortgage cover.
To know whether you have a need for mortgage insurance simply ask yourself if you or your partner were to pass away or become seriously ill would you be able to survive financially?
Independent Protection Expert at Drewberry
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Adding 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 pay off your mortgage in the event of a critical illness such as a heart attack, cancer or stroke as specified in the insurers terms and conditions.
What Does Joint Critical Illness Insurance Cover?
Joint Mortgage Life Insurance with Critical Illness covers not just death and (potentially) terminal illness, but also protects against you developing an insurer-specified critical illness. You’ll receive a payout from the Critical Illness element of the policy regardless of whether you survive the serious illness. However, once you’ve made a claim on the policy – the plan ceases including the Life Insurance element.
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.
The most common illnesses that people claimed on CIC policies for in 2016 were cancer, heart attacks and strokes.
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?
You don’t just have to worry about passing away. Although almost 600,000 people died in the UK in 2016…
- Almost 357,000 people are diagnosed with cancer every year
- The British Heart Foundation estimates 500,000 people in the UK have the heart condition atrial fibrillation – a major cause of stroke – and haven’t been diagnosed
- Someone suffers a stroke roughly every 5 minutes in the UK
- Almost two-thirds of stroke sufferers leave hospital with a disability.
Adding Critical Illness Insurance to your mortgage protection can be a valuable form of protection 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 in lower premiums.
For me, anyone with a joint mortgage where the incomes of both partners is needed to make repayments should consider covering that debt with life insurance and Income Protection. It leaves real exposure otherwise.
Director 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 financial 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 10-15% more in premium but will provide you with twice the level of cover.
- May be cheaper initially
- Both partners contribute to one policy
- Each partner receives the same cover
- Pays out only once on the first event leaving the surviving partner without any cover
- Difficult to divide a joint policy in the event of a divorce.
- Initially more expensive but potentially more cost-effective over time
- Each partner pays for their policy individually
- Each person can tailor cover (e.g. less cover for a person paying less of the mortgage)
- Each partner’s policy pays out on their respective deaths
- Divorce won’t affect the policies.
Key Points to Consider with Mortgage Life Insurance
It’s important to look at the big picture and review all the details of a policy before making a decision. There are a number of things that you can look out for that can help you find a good quality and reliable policy:
- The reputation of the policy provider
- The percentage of claim payouts
- What is included and excluded in your policy
- ABI-approved definitions
- How easy your policy is to understand
- Claims notification period
- Extras and benefits.
How Much Does Joint Mortgage Life Cover Cost?
The cost of Joint Life Insurance is different for almost everyone because it is influenced by your circumstances. The higher the possibility is for you to make a claim, the more your premiums will cost.
Factors that impact the cost of Joint Mortgage Life Insurance include:
- The amount, length and type (e.g. level or decreasing) of Mortgage Insurance Cover you require
- Your medical history and pre-existing conditions (including BMI)
- Family medical history
- Your smoker status
- Your occupation
- Your age
Should We Write Our Joint Mortgage Life Insurance in Trust?
Unless you’ve set up a trust, the Life Insurance benefit will usually be paid onto the estate of the deceased. From the estate, it then passes to beneficiaries who use the cash to repay the mortgage. This can create inheritance tax issues in certain cases.
However, 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.
Why write Mortgage Life Insurance in trust?
When a Life Insurance policy is written in trust, you can avoid having the payout being added to the deceased person’s estate by first having it placed in a trust. The trustee will then deliver the payout to the appropriate persons.
Writing your Joint Life Insurance in trust is a useful precaution to take. Even if you’re married, if you die at the same time the benefit from a Joint Mortgage Life Insurance policy would go to beneficiaries and may therefore be subject to inheritance tax.
Other benefits of writing a policy into trust include not having to go through probate to get the money, which could take a considerable amount of time. This is especially the case if there’s no will.
Senior Paraplanner at Drewberry
What are the Claim Payout Rates for Life Insurance?
In general, the successful claims payout rates for nine of the UK’s top life insurers averages to an almost 98% claims rate in 2016. The top two insurers in 2016 by claims payout rate – Scottish Widows and Vitality Life – paid 99% or more of all legitimate claims they received.
Insurer Claims Statistics
When choosing our personal protection we want to know it is going to pay out when we need it to.
By choosing a product or specific insurer from the menu below you will be able to view the claims payout rates for all of the main UK insurers for income protection, life insurance and critical illness insurance.
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.
Our insurance experts are here to offer advice on the right policy, collect and compare quotes and complete your insurance application over the phone. We’re here to help – just pop us a call on 02084327333.
Director at Drewberry