Buying a Home? What You Need to Know About Mortgage Protection
Written by Check Financial · 5 min read
The short answer
Buying a home is one of the biggest financial commitments most people ever make, and one of the moments where protection matters most. Here is what you actually need to know, in plain English.
Life insurance is not a legal requirement for a UK mortgage, but it is usually a very sensible one. The right cover ensures the mortgage is cleared if you die during the term, so you and/or your family aren't left with a debt you can't service. The two main choices are level term (cover stays the same) and decreasing term (cover reduces in line with a repayment mortgage). The right one depends on your mortgage type and what else you want the policy to do.
Do You Actually Need Life Insurance for a Mortgage?
Lenders in the UK do not require you to have life insurance to be approved for a mortgage. You can complete your purchase without it.
But the reason most people take cover anyway is straightforward: if you die during the mortgage term and there is no cover in place, the outstanding balance still has to be paid. That can mean a partner or family member taking on the debt, or in the worst case, the property being sold.
For most homeowners, the cost of a basic policy is small relative to the protection it provides.
Level Term vs Decreasing Term, Which Is Right?
Decreasing Term
Cover reduces over the term, broadly tracking the outstanding balance on a repayment mortgage.
- Typically cheaper than level term
- Designed specifically for repayment mortgages
- Pays off the mortgage if you die during the term
Level Term
Cover stays the same throughout the term.
- Suitable for interest-only mortgages
- Leaves a lump sum beyond the mortgage
- Useful if you want family protection too
What About Critical Illness Cover?
Critical illness cover pays a tax-free lump sum on diagnosis of a serious illness defined in the policy, for example certain cancers, heart attacks, and strokes. It is often arranged alongside life cover for a mortgage because serious illness is statistically more likely than death during working age.
Many clients use critical illness cover to clear the mortgage or buy time off work for treatment and recovery.
Joint or Single Policies?
For couples with a joint mortgage, the two main choices are a single joint life policy or two separate single life policies. Joint policies are usually slightly cheaper but only pay out once. Two single policies cost a little more but each person is covered independently, and the surviving partner still has cover in place. For most couples, two single policies offer materially better protection.
Mortgage Protection with a Pre-Existing Condition
Many people assume a pre-existing condition makes mortgage protection inaccessible or unaffordable. That is rarely the case. Insurers assess conditions very differently from one another, and as a whole of market adviser we approach the insurers known to view your specific condition most favourably.
See our guide for clients previously declined if that applies to you.
Real client scenario
A first-time buyer couple in their early thirties were arranging a 30-year repayment mortgage. The lender's in-house adviser had quoted a joint decreasing term policy. We compared it across the whole market, arranged two separate decreasing term policies for the same combined budget, and added critical illness cover for one partner who had a family history of heart disease.
The couple ended up with materially better cover at a cost that worked within their budget, and each had standalone protection rather than relying on a single shared policy.
Buying a Home? Let's Get Your Protection Right.
Whether you're a first-time buyer or remortgaging, we'll review the whole market and find cover that fits your circumstances.
Talk to usMortgage Protection FAQs
Is life insurance a legal requirement for a mortgage in the UK?+
Should I get level term or decreasing term life insurance?+
How much life insurance do I need for my mortgage?+
Can I get mortgage protection with a pre-existing condition?+
Should I add critical illness cover to my mortgage protection?+
What happens to my mortgage protection if I move house?+
Related Guides
How Much Life Insurance Do I Need?
A practical framework for working out the right cover amount for your circumstances.
Read guide →Life Insurance for New Families
The protection you and/or your family should be thinking about at major life events.
Read guide →Previously Declined for Life Insurance?
Why declines happen, what they mean, and how a specialist adviser can help.
Read guide →This guide is general information, not personal advice. Check Financial Ltd is an appointed representative of Capital Protect Ltd, authorised and regulated by the Financial Conduct Authority.