Mortgage Protection Insurance

Buying a home should be exciting, not stressful. But if something unexpected happens, such as becoming seriously ill, or worse, it can quickly become a financial strain. Mortgage protection insurance is there to stop your home from being caught in the middle. It gives you a financial safety net, so your mortgage is covered when life doesn’t go as planned.

Whether you’re a first-time buyer, home mover, property investor or remortgaging, this guide breaks mortgage insurance down into simple, clear terms. Let’s make this one less thing to worry about.

Why Do You Need Life Insurance for a Mortgage?

It’s not a legal requirement, but having life insurance when you take out a mortgage is a wise move. If you die before the mortgage is paid off, life insurance can clear the debt so your loved ones aren’t left to pick up the pieces.

Your mortgage is one of the biggest financial commitments you'll ever make. Life insurance helps make sure your family can stay in their home, even if you're no longer around. It’s more than just protecting bricks and mortar; it’s about protecting their future.

What Is Mortgage Protection Insurance?

Mortgage protection insurance is designed to help you keep up with your mortgage if life gets tricky. That might mean you’ve had an accident and need to take extended leave from work to recover, fallen seriously ill, or sadly passed away. This type of insurance steps in to cover your repayments or clear your mortgage entirely, depending on the policy you choose.

It’s not one-size-fits-all. You can tailor a policy to match your mortgage, your income, and your life. That way, you’re not paying for cover you don’t need, but you’re protected where it counts.

How Much Does It Cost?

Premiums vary depending on a few personal factors: your age, health, job, whether you smoke, how much your mortgage is, and what type of policy you go for. Prices can start from around £10 a month, but it all depends on your circumstances and the amount of cover you need.

Basically, the more risk you pose to the insurer, the more you’ll pay. But don’t be put off by the premiums. For many people, the monthly cost is worth the long-term peace of mind. After all, a small monthly spend can help protect your biggest investment.

What Different Types Are There?

Here are the main types of mortgage protection insurance you can have:

• Mortgage life insurance: Pays off your mortgage if you die before it’s fully paid. Depending on the type of mortgage repayment method you’ve chosen, you can have level term insurance (same payout throughout and most suitable for interest-only mortgages) or a decreasing term insurance (the payout drops as your mortgage does and is most suitable for a repayment mortgage).

• Critical Illness cover: Provides a lump sum payment to pay off your mortgage if you suffer a serious long-term condition, such as a heart attack, stroke, loss of limbs or cancer. Not ALL serious illnesses are covered, and some are only covered if they reach a certain level of severity. But most insurance providers’ definitions are usually quite comprehensive. 

• Income protection insurance: Gives you a portion of your income if you can’t work due to illness or injury, which you can use to cover your mortgage and other bills. The maximum amount you can claim is usually 65% of your salary up to a certain level.

Each type of insurance provides a different type of cover, so it’s not usually a case of either/or, more about looking at your personal and financial circumstances to weigh up how much cover you need. It’s not uncommon to have cover across all three types of mortgage insurance.

Do You Have to Have It to Get a Mortgage?

No, most lenders won’t insist on mortgage insurance, and it’s not a legal requirement. But that doesn’t mean it’s not a good idea. If you’ve got people who depend on you financially, life insurance makes sure they won’t have to take on your mortgage if the worst happens. It’s about giving them security. Some lenders might require it in specific cases, but generally, it’s your call.

What Happens when Your Mortgage Is Paid Off?

It depends on the type of policy you have. If you went for a decreasing term life insurance policy tied to your mortgage, the policy usually ends when the mortgage is done and dusted.

But if you’ve got level term cover, it stays in place until the end of your agreed term, which could be longer than your mortgage loan term. That means it can still offer a payout should the worst happen, even if your mortgage is long gone.

Who Can Have Mortgage Insurance?

If you’ve got a mortgage, you can get mortgage protection insurance. It doesn’t matter if you’re a solo buyer, part of a couple, self-employed, or on a fixed salary—there are options out there.

Your health, job, and lifestyle will influence what’s available and how much you’ll pay. Some policies may have exclusions or extra costs if you’ve got a health condition or a risky job. But honesty is key when you apply. It helps make sure your policy will pay out when it needs to.

How Long Does It Take to Put in Place?

It can be super quick, sometimes just a few days if everything’s straightforward. In fact, some insurers offer instant cover online.

If there’s anything complicated in your application (like health issues), it might take a couple of weeks while underwriters do their thing. To speed things up, have your mortgage information and medical details readily available, should you be asked for them.