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Do you need life insurance for a mortgage?

Find out the answer to this commonly asked question in our latest insurance guide

A photo of Daniel Sharpe-Szunko, the author

By Daniel Sharpe-Szunko

Published on: 7 June 2021

4 min read

Do you need life insurance for a mortgage?

Owning a property in the UK can be confusing with so many things to think about financially. A mortgage will often be the biggest financial commitment that you’ll have in your lifetime, so naturally its important to think about protecting your mortgage and your home. 

In this independent review we look at the answers to one of the biggest questions, do you need life insurance for a mortgage? This is a very common question that people ask in the UK and it’s something that people can be confused about. The main reason for the confusion is that you’ll sometimes be told that you must have life insurance to protect your mortgage. 

Question: Do you need life insurance for a mortgage? 

Answer: No, it is not a legal requirement for you to have life insurance for a mortgage. 

Recommendation: You should definitely consider getting life insurance for a mortgage, especially if you have children or a partner. 

Learn more about life insurance in our MPO Life Insurance Guide.

You can find out more about mortgages in some of our MPO Mortgage guides:

What is mortgage life insurance? 

Mortgage life insurance is also known as decreasing term assurance, which is the second most common form of life cover. This type of policy is specifically designed for a person with a repayment (capital and interest) mortgage. 

The amount of cover decreases over time at the same or a similar rate to the mortgage balance as you make your repayments over the term (years). Your policy is specifically for the purpose of repaying your mortgage if you die and leave your loved ones with a debt free home. 

If you think about what might happen if you die, ultimately you might want to make sure that your family doesn’t have any mortgage debt. This may be because your income would be lost and your partner might need to look after your children, it may also be to leave your partner with no mortgage debt on your home. 

Can you get a mortgage without life insurance? 

Yes, you can absolutely get a mortgage without life insurance and it’s not usually a condition of any mortgage to have life insurance. This is similar contents and building insurance where it is advised but not a necessity.

Some mortgage lenders may strongly recommend that you take out life insurance when buying a house to protect your family home. Also, any good mortgage advisor or broker would generally want to protect your mortgage when you buy or remortgage your property. 

If you are being told that you need to have life insurance for a mortgage then you should probably question that. There might be a reason for the mortgage lender wanting you to have life insurance, but it shouldn’t be a legal requirement. 

Learn more about bad credit mortgages in our guides ‘The complete guide to IVA mortgages’ and ‘Can I get a mortgage with a default?’.

What life insurance do I need for a mortgage? 

There are several main types of life insurance and most of them can be used to protect a mortgage. You should speak to your mortgage advisor or a life insurance specialist to figure out which type of cover is best for you. 

Here are some of the main mortgage life insurance options: 

Policy type Pro’s Con’s 
Decreasing term life insurance (mortgage life insurance) Specifically for repayment mortgages 
Cheaper than family life insurance 
Should repay your mortgage over the term 
Might not be sufficient to protect children 
Will only pay off the mortgage 
Will need to be changed if mortgage changes 
Level term life insurance (family life insurance) Offers level lump sum so cover increases as mortgage balance drops 
Can be cheaper over the years 
Potentially no need to renew or change 
Can be used to protect children and mortgage 
Premiums will be higher than mortgage life insurance 
Might not be affordable in the beginning 
Can end up having too much cover 
Family Income Benefit Can be used to protect mortgage repayments 
Premiums can be more affordable for some people 
Might not need to change if you change your mortgage 
Might not be enough cover longer term 
Not always the right option if just protecting a mortgage repayment 
Can be confusing for some people 

There are some other life insurance options for a mortgage but these are the most common and the most suitable. 

Find out more about critical illness cover in our MPO Critical Illness Insurance Review.

Learn more about income protection in our guide ‘Income Protection Insurance Explained’.

Is mortgage life insurance linked to a mortgage? 

One of the most common misconceptions about mortgage life insurance is that the policy is linked to the mortgage. The reality is that your cover is completely separate, even if they are with the same company (e.g. HSBC). 

There is absolutely no link between your mortgage life insurance policy and your mortgage, apart from one is to pay off the other. This means that you have ultimate control over your cover and you can do more with it, such as: 

Learn more about getting life insurance from your bank or building society in our guide ‘Should I take out life insurance with my bank?’.

How to get mortgage life insurance 

There are several ways to buy life insurance to protect your mortgage and there are plenty of options which is good. The best way to get mortgage life insurance is to speak to an independent expert who can guide you properly and help you. 

Our recommended life insurance partners will give you free advice to help you to protect your home and your family. 

Resources

Landlord TODAY – More than 40% of mortgage holders do not have life insurance

Finder.com – Life insurance statistics

Statista – Life insurance industry in the UK: Statistics & Facts

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