Mortgage Protection Life Insurance

Decreasing term life insurance is commonly used alongside repayment mortgages because the amount of cover reduces during the policy term. The intention is that the insured amount broadly follows a mortgage balance that is also reducing. The policy should still be checked carefully because the way cover decreases may not exactly match every mortgage.

With decreasing term insurance, the amount that could be paid out reduces during the policy term. With level term insurance, the insured amount normally remains the same throughout the term. Level cover may therefore leave more money available beyond the mortgage, while decreasing cover is often designed specifically around a reducing financial commitment.

If the sole purpose is mortgage protection, the outstanding mortgage balance provides a useful starting point. But mortgage debt may not be the only financial issue your family would face. Income replacement, childcare, household bills and other debts may also matter, so the amount of cover can be considered in the context of the household rather than the mortgage alone.

Where the main purpose is mortgage protection, people often consider a policy term that broadly matches the remaining mortgage term. Your circumstances may justify a different period, particularly where the policy is also intended to protect children, replace income or meet another long-term family need.

Yes. Couples may consider a joint life policy or separate individual policies. A joint policy will usually pay once following the first qualifying death and then end, whereas two separate policies can provide independent cover for each person. The right structure depends on the protection required, flexibility and budget.

The life insurance policy and the mortgage are usually separate contracts, so moving home does not necessarily mean the life policy ends. However, a larger mortgage, longer borrowing term or changed family circumstances may mean the existing level of cover should be reviewed.

It can be sensible to review the cover when the mortgage changes. A remortgage may alter the balance, term or repayment structure, and the life insurance originally arranged may no longer match the financial commitment you want to protect.