Level Term Mortgage Life Insurance pays out a cash lump sum to pay off your mortgage should you pass away.
The amount insured remains fixed – or ‘level’ – over time. This means it’s particularly suited to protecting an interest-only mortgage, where the outstanding capital balance doesn’t fall over time.
Another use may be for family protection, as the sum assured doesn’t diminish with time, providing your loved ones with a consistent amount of cover over the life of the policy.
Level Life Insurance offers a fixed term policy that will guarantee a set lump sum that pays out if you die during that term.
For example, if you had a mortgage that lasted for 25 years, you’d take out a 25 year Mortgage Life Insurance policy to cover the mortgage balance – say £250,000 – over those 25 years.
If you died during that term, you’d receive £250,000 regardless of how many years into the policy you passed away.
Level Life Insurance will pay out on the death of the insured individual.
Most policies now include Terminal Illness Cover, which allows the benefit to be paid out early if you’re diagnosed with fewer than 12 months to live.
Critical Illness Insurance is an optional add-on to the policy for an additional premium. It extends the scope of the cover to include a payout for serious illnesses also – the most common claims are for:
Where the quality of Critical Illness Cover can vary considerably from one insurer to the next it is important check the small print.
The first thing to note is that Mortgage Life Insurance is not compulsory. You don’t have to have it to take out the loan.
However, when looking at the risks involved with not being insured many people prefer to have suitable protection in place.
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.
1 in 18
1 in 8
1 in 4
The price of Level Life Insurance depends on a variety of factors, including:
A 50-year-old smoker with a serious health condition would therefore pay more for cover than a healthy 25-year-old non-smoker.
Adding Critical Illness Insurance to your policy will also increase premiums due to the increased likelihood of you suffering a critical illness compared to passing away.
The table below contains premiums for a healthy individual of three different ages looking for Level Life Insurance worth £250,000 over a 20 year period.
Below is an overview of some of the top Mortgage Life Insurance companies in the UK comparing some of the key details of their policy terms.
Aegon’s Scotland-based UK operations are wholly owned and operated by Dutch insurer Aegon N.V.
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.
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.
Guardian is a relaunched protection brand with a number of unique features to its policies.
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
LV is the UK’s largest friendly society, with more than 5.8 million customers, 1.1 million of whom are members.
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.
Founded in 1812, Scottish Widows is today part of Lloyds Banking Group.
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.
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.
We can help you decide on a level of cover that’s appropriate for you, advise on whether you need to write the policy into trust and the pros and cons of adding Critical Illness Insurance to the policy.
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.
If it is all getting a little confusing and you need some guidance please do not hesitate to get in touch. Pop us a call on 02084327333 or email us at email@example.com.
Director at Drewberry
Sam was very helpful and kept me informed at all times. Brilliant service.