Mortgage Life Insurance

Helping you protect all the things you work hard for...

 

Why Mortgage Life Insurance?

 

Life Insurance pays out a tax-free cash lump sum to pay off your mortgage should you pass away.

 

It provides you and your loved ones ❤ with peace of mind – your mortgage will be repaid and you won’t lose your home should the worst happen.

 

Include Critical Illness Insurance to protect the mortgage should you suffer a serious illness such as cancer, heart attack or stroke.

 

Opt for level or decreasing mortgage life insurance depending on whether you are protecting an interest-only or repayment mortgage.

 
What is it for?
 

What does Mortgage Life Insurance cover?

Death

Should the policyholder die within the policy’s term, the cover will pay out a lump sum to their beneficiaries that can be used to repay the mortgage loan.

Terminal Illness

Most leading Life Insurance policies that cover your mortgage will also pay out early if you are diagnosed as terminally ill by a medical practitioner and have less than 12 months to live.

Critical Illness Cover

By adding serious illness cover to your plan, your policy will pay out if you suffer from one of the specified critical conditions named in the policy terms. Most policies now cover over 40 conditions with cancer, heart attack and stroke being the most common reasons to claim.

What does it cover?
 

How does Mortgage Life Assurance work?

Stage 1:
You pass away or suffer a critical illness during the term of your policy, this will tend to set equal to length of your mortgage.

Stage 2:
Your family make a claim with the insurer, including your death certificate should your pass away or medical evidence should you be claiming for a serious illness.

Stage 3:
Once the claim has been approved the insurer pays the sum assured either into a trust or directly to the family and the policy is terminated.

Stage 4:
The funds from the life insurance claim can then be used to repay the mortgage loan in full.

How does it work?
 

Do I need Mortgage Life Insurance?

Although Mortgage Life insurance is not compulsory, it may be worth getting covered if your family would struggle to keep up with the mortgage loan repayments if you passed away. On average, 49 mortgage possession claims and 27 possession orders are made every day.

What is the risk of passing away?

Based on ONS life expectancy data (2013-15), someone with a 25 year mortgage term would have the following chances of passing away before the loan is repaid:

25 years old

35 years old

45 years old

1 in 33

1 in 15

1 in 6

Do I need cover?
 

Your Key Options

Level of Cover:
Usually set to match the cost of your mortgage.

Length of Cover:
Usually set to end when you have paid off your mortgage.

Level or Decreasing Cover:
The type you choose will depend on the type of mortgage you have.

Guaranteed or Reviewable Premiums:
Set a consistent cost for your premiums or have them reviewed and adjusted regularly.

Including Critical Illness Cover:
As the chances of suffering a serious illness is far higher than death it definitely makes sense to consider adding this option to your policy.

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What is Mortgage Life Insurance?

Mortgage Life Insurance is a type of Mortgage Insurance that is designed to pay off your outstanding mortgage debt should you pass away.

When the policyholder dies, a lump sum will be paid out to the family which can be used to pay off the remainder of the mortgage debt.

If the primary earner of a household passes away, those that are left might behind may find it difficult to cover their core expenses including monthly mortgage payments, utility bills and everyday living costs.

Drewberry's Guide to Mortgage Life Insurance

By taking out a Life Insurance policy to cover your mortgage it means your loved ones can stay in their home and don’t have to worry about making mortgage payments should the worst happen.

It can take away any financial worries they would otherwise have during such difficult times.

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What Does Mortgage Life Insurance Cover?

Mortgage Life Insurance first and foremost covers the death of the policyholder by paying out a cash lump sum to clear the mortgage debt should they pass away.

Insurers usually include terminal illness cover in policies, which provides you with a payout if you’re diagnosed with less than a year to live. This benefit is subject to certain terms and different insurers may have different definitions of a terminal illness.

Most types of Life Insurance will typically cover almost any cause of death; however, there are a few common exclusions that you will find on many if not most Life Insurance policies. The most common exclusion is death by suicide within the first 12 months of the policy.

Including Critical Illness Cover

Most life insurance policies provide an option to include Critical Illness Insurance (which should not be confused with terminal illness cover) to protect you and your mortgage against the risk of serious illnesses such as cancer, heart attack and strokes. Given the chance of suffering a serious illness is far higher than the risk of passing away including an element of critical illness cover will significantly increase the cost of your policy.

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Rauri was easy to talk to. Explained everything really well. Took prompt action when requested and was in touch when he said he would be without being pushy.

Robert Eldridge
07/06/2018
 

How Does Mortgage Life Cover Work?

The first thing to consider is how much cover you need. Typically, you’d align this with the outstanding mortgage debt you hold.

The type of mortgage you have will also affect the type of Mortgage Insurance you will need: either a Decreasing or Level Life Insurance policy.

  • A decreasing policy is best suited to a straightforward repayment mortgage, where the outstanding balance is repaid over time along with the interest owed.
  • Level policies tend to be used to cover interest-only mortgages, where the outstanding mortgage balance remains fixed over the life of the loan.
 

Compare Life Insurance for a Mortgage

Once you know what sort of policy you’re looking for, you can start searching the market for quotes to compare the different insurers and policies.

You can do this yourself by going directly to insurers and comparing Mortgage Life Insurance quotes yourself. However, this can be a time-consuming process and many policies have different options and additional benefits that mean it’s not always easy to compare policies like-for-like.

josh martin, independent protection expert at drewberry

At Drewberry, our financial advisers know the different insurers and policies inside and out, which puts them in the best position to help you find a policy that suits you. We’ll search the entire UK market to find the best Mortgage Life Insurance policy for your needs and circumstances.

We can be of particular help if you’ve suffered from pre-existing conditions that might make it more difficult to get Life Insurance.

Josh Martin
Independent Protection Expert at Drewberry

 

Applying for a Mortgage Life Insurance Policy

To apply for a policy or get accurate quotes, you will need provide some basic information:

  • Age
  • Your outstanding mortgage debt
  • The type of mortgage you have
  • Smoker status
  • Your medical history
  • What you want from your policy (the level of cover you want and how long you want it for).
 

Making a Claim

If the policyholder passes away, is diagnosed with a terminal illness, or is diagnosed with a critical illness (if you added critical illness cover to your policy), you can claim.

To do this, you will need a claim form from the insurer, as well as the original documents for your policy and a death certificate. Obtaining a death certificate can be done by contacting either the General Register Office (England and Wales), the National Records of Scotland (Scotland), or NIDirect (Northern Ireland).

Robert Harvey, Independent Protection Expert at Drewberry

When you take out your insurance policy with us, we will be able to support and help you through the process of claiming at such a difficult time.

Our financial advisers will be able to ensure everything runs smoothly and that you have all of the right documentation prepared to make a claim.

Robert Harvey
Independent Protection Expert at Drewberry

 

Paying Off Your Mortgage

Providing the insurers receive all of the relevant documentation and the claim is accepted (the top insurers by claims paid had a successful claims rate of over 98% in 2016), your insurer will most likely pay your claim within a few weeks.

Your cover should match the cost of your mortgage so you can pay it off all at once.

If you did not write your policy in trust, the payout will form part of the deceased person’s estate and it will be the responsibility of the estate’s executor to deliver the policy’s payout to the necessary persons.

You’ll likely have to wait for probate, which could take time; writing your policy into trust means this process is bypassed as the cash is paid directly to the trust on your death.

With the payout from your insurance policy, your loved ones will be able to pay off the rest of their mortgage debt all at once. That way they can stay in their home without having to worry that they might fall behind on mortgage payments without your help.

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Do I Need Life Insurance for a Mortgage?

Often mortgage brokers and lenders will say it’s a requirement for you to have Life Insurance to cover your mortgage, but in reality there’s no law that says it’s necessary.

Mortgage Life Insurance may not be required if:

  • You live alone and don’t want to leave the property to anyone after your death, so you don’t mind it being sold to repay the outstanding debt
  • You don’t have any dependents
  • You live with someone who could take on the entire mortgage debt by themselves should you pass away.
siobhan paul, independent protection expert at drewberry

While there are certain situations in which Mortgage Life Insurance may not be required, the reality is that most of us want to leave the property to someone else, have dependents living in the home or don’t have anyone else who could take on the entire mortgage debt themselves and keep up with repayments.

In such situations, we’d typically recommend a Life Insurance policy which at least covers the outstanding mortgage debt. It provides peace of mind and security and you know your family and your home are covered should the worst happen.

Siobhan Paul
Independent Protection Expert at Drewberry

If you want your loved ones to be able to stay in the family home should you pass away without the financial burden of a mortgage to repay, Mortgage Life Insurance could be the cover you need.

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Mortgage Life Insurance Policy Options

There are a range of options that you will find with Life Insurance for your mortgage. These options are available to help you match your cover to your mortgage and your financial circumstances.

joint mortgage insurance can cover a joint mortgage in two people's names

Joint Life Insurance to Cover Your Mortgage

If you share a mortgage with your partner, you might consider a Joint Mortgage Life Insurance policy.

This type of insurance works very much in the same way as Mortgage Life Insurance, except that the policy will pay out if either partner dies.

Joint mortgage life insurance for couples

Most Joint Life Insurance policies work on a ‘joint life, first death‘ basis and will end after it has paid out for the death of the first partner.

If you would need a second payout after the first partner’s death, perhaps to provide financial stability for children even after the mortgage is paid off, then you may need to consider taking out two single policies instead of one joint policy.

This will ensure that any dependants or beneficiaries will receive payouts upon the death of both partners. The first would clear the mortgage, while the second could be used to maintain a standard of living.

 

Level Term Life Insurance for Your Mortgage

With Level Term Mortgage Life Insurance your insurance benefit will stay the same throughout the term of your policy and won’t change.

This type of Mortgage Insurance is designed to cover an interest-only mortgage. This is because the outstanding capital with these types of mortgages doesn’t decline over time. Level Term Insurance provides exactly the same amount of cover at the end of your policy as you had at the beginning.

 

Decreasing Life Insurance for Your Mortgage

Decreasing Term Mortgage Life Insurance will see your cover fall the longer you have it, eventually reaching a benefit of zero when the end of the policy’s term is reached.

While Level Term Cover stays the same, Decreasing Term Cover decreases over time.

This type of Life Insurance is best suited to cover a repayment mortgage loan. This is because the cover of the insurance policy decreases to match the decrease of your mortgage debt.

This saves mortgage owners from having to pay for cover that they don’t need as premiums for decreasing insurance policies tend to be cheaper than they are for Level Term Mortgage Insurance.

However, these policies are set up to decline over your mortgage term and reach zero by the end, so there’ll be no cover once your mortgage is repaid.

If you take out Decreasing Life Insurance, you need to make sure the rate at which your level of cover decreases doesn’t exceed the rate at which your mortgage is decreasing else you may have a shortfall.

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CIC can be added to your Mortgage Insurance to increase your cover.

Should I include Critical Illness Cover?

By adding Critical Illness Insurance to your insurance policy, you will be able to claim on your policy if you’re diagnosed with a serious illness such as cancer, heart attack or a stroke as per the terms of your policy.

 

What Does Critical Illness Insurance Cover?

Mortgage Life Insurance with Critical Illness Cover can vary significantly depending on the insurer you take out your policy with. This is because the definitions of a critical illness are chosen by each insurer independently. So a ‘mild’ heart attack might not attract a whole payout from one insurer, for instance, if it doesn’t fully meet their definition of a heart attack in the policy, but another insurer may pay out a percentage of the benefit you’re entitled to.

Sam Carr, Independent Protection Expert at Drewberry

Some insurers can cover as many as 100 different medical conditions with this type of cover, while others might only cover 40 or even fewer.

In other instances, insurers may only cover severe cases of certain critical illness while not paying out for minor versions of the same conditions. For this reason, it makes sense to speak to an adviser who can look over any Critical Illness Insurance policies you’re considering to make sure you have the most robust product possible.

Sam Carr
Independent Protection Expert at Drewberry

 

Is Mortgage Life and Critical Illness Cover Worth it?

One of the most notable issues with Life Insurance with Critical Illness Cover is that the policy will only pay out once for either critical illness or death. If you need to claim for a critical illness you will be left without Life Cover.

If your only purpose for taking out an insurance policy is to pay off your mortgage, then it won’t be a problem that this kind of policy pays out once.

Where the critical illness element of the policy will only payout for serious illnesses you could still find yourself and your family struggling to keep up with your monthly mortgage repayments if you are unable to work for something that isn’t covered such as anxiety/depression or a muscular-skeletal issue.

Have you considered Income Protection Insurance?

If you would like to cover your monthly mortgage repayments should you be unable to work due to any illness or injury which renders you unable to do your current job you are best looking at Income Protection Insurance. Where critical illness cover can be limited to 40 or so more serious conditions, Income Protection with an own occupation definition will pay out a monthly income you should you be unable to work due to any accident or sickness which stops you doing your current line of work.

Victoria Slade, business protection expert at drewberry

When speaking to clients we often end up talking about Life Insurance and a separate Income Protection policy rather than just adding on Critical Illness Cover.

It can be more cost effective and offers greater level of protection to ensure mortgage repayments can be met each month.

Victoria Slade
Independent Protection Expert at Drewberry

 

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How Much Does Mortgage Life Insurance Cost?

There are a range of factors that will influence the cost of a Mortgage Life Insurance policy. The cost of a policy will be different for different people and while we do have control over some cost factors, there are others that we cannot control:

  • The value of your mortgage debt
  • The type of Life Insurance you choose (Decreasing/level or guaranteed/ reviewable premiums)
  • Your age
  • Your smoker status
  • Your policy’s cease age
  • Your medical history and current health (including your BMI)
  • Your family’s medical history.
 

Compare Mortgage Life Insurance

When comparing Mortgage Life Insurance policies, there are a few key factors to consider to ensure you get the best cover available for the best possible price.

Medical history

Not everyone has a perfectly clean medical history when they apply for Mortgage Life Insurance. If that’s the case for you, it’s important that you get expert advice.

Can I get mortgage life insurance with pre-existing conditions?

When faced with adverse medical history – e.g. heart conditions, diabetes, being overweight etc. – insurers will typically apply a ‘loading’ to your monthly premiums.

This will usually be expressed as a percentage of the premium, say 50%, which means you’ll face a 50% increase on top of your monthly premiums as a result of your medical history.

However, not every insurer looks at medical history in the same way. Some insurers may be more lenient than others. One insurer may be willing to put a lower loading on your policy or even no loading at all, so it’s always worth checking with an independent expert if you need Mortgage Life Insurance to cover pre-existing conditions.

Setting the interest rate on a decreasing policy

With Decreasing Mortgage Life Insurance, you’ll have to ensure that the amount your policy is decreasing by each year doesn’t exceed the interest rate on your mortgage. Otherwise, you could face a policy not having sufficient cover for your mortgage should the worst happen.

It is best to discuss the rate at which your level of cover will decline with an adviser to ensure you’re choosing the right cover to align with your outstanding mortgage.

Including Critical Illness Cover

As mentioned, you can add Critical Illness Cover to your policy. Look to see how much this will cost, as it will typically significantly increase the premium to take into account the far greater incidence of serious illness than death.

Also look to see how many critical illnesses are covered and the definitions of those critical illnesses. You want to ensure that you’re getting not only a wide array of illnesses covered but that those conditions have robust definitions, increasing your chance of making a successful claim.

At Drewberry, our advisers have access to specialist software that assesses providers’ Critical Illness propositions to see what the likelihood of you making a successful claim might be.

Guaranteed or reviewable premiums?

There are three types of premiums to choose from when you take out a policy, although some insurers may not always offer all options.

Reviewable premiums can be cheap at first but become more expensive later on.

Guaranteed Premiums are consistent and stay the same throughout the term of your policy.

Age Banded Premiums will increase at a consistent rate as you age set out clearly in your policy. You won’t have to worry about any unexpected hikes.

Reviewable Premiums are reviewed on a regular basis by your insurer and will change depending on a range of different factors. This includes changes to your situation as well as changes to your insurer’s situation.

For example, if your insurer doesn’t have a particularly successful investment year, they might increase your premiums. You might not know what you’ll pay from one year to the next.

Sam Barr-Worsfold, Independent Protection Expert at Drewberry

We normally recommend you apply for a policy with guaranteed premiums. This is because you don’t always have control of the factors that might increase the cost of reviewable premiums.

Sam Barr-Worsfold
Independent Protection Expert at Drewberry

Get cover while the mortgage application is in process

Some providers will offer you limited Life Insurance while your mortgage and/or insurance application is in process. If getting cover as soon as possible is important to you, you may want to look into a provider that will offer you such cover from the start of your application.

michael barrow, independent protection expert at drewberry

With so many factors to take into account when applying for and comparing Mortgage Life Insurance policies, it makes sense to talk to a whole-of-market adviser.

We know the market and Mortgage Life Insurance policies inside out and so are well-placed to find you the option best suited for you.

Michael Barrow
Independent Protection Expert at Drewberry

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Best Mortgage Insurance providers

Best Mortgage Life Insurance Companies

Top 5 Mortgage Life Insurance Providers
Aegon

Aegon

Aegon was founded in 1831 as Scottish Equitable in Edinburgh. The insurer is today part of the Dutch financial services conglomerate Aegon N.V., which provides Mortgage Life Insurance and other protection products in several countries around the world.

AIG Insurance

AIG

American International Group’s (AIG’s) UK operations previously traded under the Ageas Protect brand, which AIG bought from the Ageas Group in 2014. As part of the sale, Ageas Protection was renamed AIG Life and encompasses the American insurance giant’s UK life protection operations.

Liverpool Victoria

Liverpool Victoria

Liverpool Victoria is the official name of LV=, the brand the insurer has been trading under since May 2007. It is one of the largest insurers int he UK, with more than 5 million customers across the country. LV has no shareholders and is entirely owned by its members. Its head office is in Bournemouth.

Royal London

Royal London

Royal London was initially founded as a friendly society before changing to a mutual society in 1908. As well as Mortgage Life Insurance, Royal London now boasts the position of the UK’s largest mutual life, pensions and investments company.

Zurich Insurance

Zurich

Swiss insurance giant Zurich is one of the world’s largest insurers. It has operations in more than 170 countries worldwide. In total, around a sixth of Zurich’s 60,000-strong workforce is based in the UK. As well as Mortgage Life Insurance, Zurich operates across the general insurance marketplace and offers pensions, savings and investments.

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Get Expert Mortgage Protection Insurance advice from Drewberry advisers.

Get Expert Mortgage Life Insurance Advice

Getting life insurance to protect a mortgage can be a valuable product if you have a family and a home that you are still paying off. With this type of protection, you will be able to ensure that your loved ones can comfortably stay in their home and have one less bill to worry about.

We will help you find and compare quotes and, should the time come where you need to claim, we’ll also help you get all of the necessary documentation in order. Please don’t hesitate to pop us a call on 01273646484 or email help@drewberry.co.uk

Tom Conner
Director at Drewberry

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Compare Top 10 UK
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Takes approx. 60 seconds
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Level of Cover
per
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Date of Birth
Loading your options...
Thank you for using our Quote Tool
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T: 02084327333
Our in-house Experts are here to provide FREE impartial advice!
Our Experts can answer all your questions
Our Experts can send you more appropriate options based on your personal circumstances

Very important if you are either Self-Employed or a Company Director.

Our online quote tool is good but our Experts are better

Oue Experts have access to far more insurers and can often find a better deal offline.

Saves you time, let our Experts do what they are best at

Frequently Asked Mortgage Protection Insurance Questions

 
For mortgage protection do you need critical illness cover? Is it worth taking out this type...
 
I’m thinking of getting covered but I’m not sure if mortgage protection is worthwhile or not. What...
 
I’m considering critical illness cover but do insurers actually pay claims? I’m a bit worried...
 
I’ve got two houses, one of them I live in and the other I rent out. Is it okay to have a mortgage...