Mortgage life insurance
Mortgage life insurance explained
Mortgage life insurance, also known as mortgage protection, pays out a lump sum to your loved ones to help them pay off your mortgage debt in the event of your death.
How does mortgage life insurance work?
There are two different types of life insurance you can take out to cover your mortgage repayments; level term life insurance and decreasing term life insurance.
Decreasing term life insurance - with a decreasing term life insurance policy, the amount that you’re covered for reduces in line with your mortgage repayments, but your monthly premium remains the same. This type of policy is designed for repayment mortgages as it ensures that your loved ones will be left with enough money to cover the remaining mortgage debt when you pass away. Decreasing term life insurance is the most common policy and typically costs less.How much cover do I need?
The amount of mortgage life insurance you need will depend on your personal circumstances but you need to make sure that your policy covers the amount left on your mortgage. Because the policy will be a decreasing term policy that reduces in line with your mortgage, make sure you have enough cover to pay off your mortgage from the start and align the policy to reduce in value at the same rate as your mortgage repayments.
How much does a mortgage life insurance policy cost?
The cost of your mortgage life insurance policy will depend on a variety of circumstances, including how old you are, your health and past medical history, how much you still owe on your mortgage, how much you earn and what level of cover you want.
Do I need life insurance to get a mortgage?
Whilst it isn’t a legal requirement, most mortgage lenders will require you to have a policy in place as a condition of the mortgage offer. Also, you need to bear in mind that if you were to die with unpaid mortgage debt, the person that inherits your property is responsible for paying it off. Most people take out mortgage life insurance so that their loved ones don’t have to struggle financially when they pass away. You might not need to take out mortgage life insurance if:
Can I have my mortgage life insurance policy written in trust?
Yes, you can put your mortgage life insurance policy in trust. This means that the payout your family receives will be protected from inheritance tax. If the policy isn’t in trust and you were to die during the policy term, the money forms part of your estate and your dependants would need to pay inheritance tax before they receive the payout. However, if the policy is in trust, the payout is protected from inheritance tax and goes directly to your loved ones.
What’s the difference between life insurance and mortgage life insurance?
Life insurance comes in many forms and the payout your loved ones receive can be used in any way they wish. Mortgage life insurance is designed specifically to cover your remaining mortgage debt after you pass away.
Compare decreasing term life insurance
Compare life insurance providers on Compare By Review. Unlike traditional comparison sites, our tables are ordered based on real customer reviews, so you can purchase a policy from a provider that you can trust.
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Life Insurance Quote*
With Critical Illness Cover**
Minimum Cover Limit***
Maximum Cover Limit****
Review Score
Life Insurance Quote*
With Critical Illness Cover**
Minimum Cover Limit***
Maximum Cover Limit****
Review Score
Life Insurance Quote*
With Critical Illness Cover**
Minimum Cover Limit***
Maximum Cover Limit****
**This quote also includes £37,500 critical illness cover.
***This is the minimum amount of life insurance cover you can get from this provider.
****This is the maximum amount of life insurance cover you can get from this provider.
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