Mortgage life insurance

If you want to leave your loved ones financial protection for your home, even if you’re not there to help pay the mortgage, you may want to consider mortgage life insurance cover.

life insurance options

What is mortgage life insurance?


Mortgage life insurance, also known as decreasing term life insurance, pays a lump sum on your death to help pay your repayment mortgage. If your repayment mortgage hasn’t been paid off when you die, then the money from a decreasing life insurance policy can help your loved ones meet your outstanding financial obligations.


Most mortgage life insurance providers have a cap on the interest rate you are charged. For example, if your life insurance cover for a repayment mortgage is capped at 7% but your mortgage’s interest rate is 8%, your payout might not cover the full amount of your outstanding debt if you should die within the term of your policy.


Here we explain the different types of insurance available to cover the outstanding debt you might have on your mortgage: decreasing term cover, level term cover and increasing term cover:

Decreasing Life Insurance

Decreasing life insurance is designed to cover a repayment mortgage should you pass away before you have finished paying it off. As the amount you have to repay diminishes over time, the insurance pay-out also reduces. Your monthly contributions remain the same, however you may be paying less monthly premiums than with other types of cover.

Level Life Insurance

If you have an interest-only mortgage, then level life insurance might be your preferred option, as it pays out a larger, fixed amount. For this reason, it usually costs more than decreasing life insurance. Another consideration is that it is not index-linked and therefore your pay-out will not increase with inflation.

Increasing Life Insurance

This type of policy increases in value over time and is designed to counteract the effects of inflation. Providers may do this in two ways - this can be index-linked or rise by a fixed amount periodically (or at specified times). This rise may affect the cost of your premiums, but the policy holder will be given the option to accept or decline this increase. The cover is based on the age and health of the policy holder at the time it is taken out. Premiums are typically higher for this type of life cover, but the final pay-out can help your beneficiaries in many ways.


The right life insurance for you will depend on what you need cover for, how much you need and over what period.

You choose to pay a fixed monthly amount

Depending on which life insurance policy you choose, you will be offered either guaranteed or reviewable premiums.

With reviewable premiums, the insurer has the right to assess and adjust the premiums periodically according to a number of risk and economic factors including things like interest rates or advances in medical treatment. Insurance which has reviewable premiums may have an initial low cost, but you could end up paying significantly more in the long run. However if you intend to take out a long-term policy with a high value payout, then a reviewable premium offers you a way to mitigate the value of the payout against the rising cost of living. Your age and specific health concerns are only considered when you take out your policy, so although your payout and premiums may be higher than other policies, they would be lower than if you needed to take out more cover at a later stage when your age will have advanced and health concerns increased.

With guaranteed premiums, the amount you pay for your cover now will be fixed until the term of the policy ends. If you are on a strict budget then choosing a policy with guaranteed premiums could help you stay in control of your monthly outgoings.

The healthier you are, the less you pay

Your lifestyle, age and health will all have a bearing on how much your monthly premiums will be. Making lifestyle choices, such as quitting smoking or taking more exercise, may have a positive effect on your mortgage life cover premiums.

There are many critical illnesses that a person can develop that have nothing to do with lifestyle. If you add critical illness cover to your life insurance policy, it could ease the financial burden should you become critically ill, allowing you to focus on getting better. Critical illness can cover things like cancer, a heart attack or a stroke.

Joint or single insurance?

If you’re paying for the mortgage with your partner, some insurers offer the option to take out joint or single mortgage life insurance. A joint policy pays out once upon the death of the first policy holder.

A couple may find a joint policy is easier to set up than a single one and it will usually be cheaper. However, it is important to consider what may happen if you and your partner were to separate and have a joint policy. If you decide upon separating to get a single policy instead, remember that you will be older at that time and can expect premiums to have increased.

Taking out two single policies at the outset means you are both covered in the event of a break-up, and unlike a joint policy (which only pays out once), two single policies will pay out once per policy holder.

Inheritance tax

If you die, your mortgage life cover forms part of your estate, making it subject to inheritance tax. A way to deal with this is to consider writing the policy into trust, which in certain circumstances means the insurance will pay directly to your named beneficiaries. In other words, it never becomes a part of your estate. Your loved ones can also receive the money more quickly.

If you’re unsure, talk to a professional

  • If you can, try to choose an insurance policy that gives you the option to write in trust directly without an extra charge.
  • It’s important to take professional advice before doing so. It is very difficult to change or cancel a trust once it’s been created, so you need to be aware of all of the implications before making a commitment.
  • Visit a site that offers unbiased help for contacting professionals, such as independent financial advisors (IFAs), solicitors and more.
  • Some Citizens Advice Bureaus also have volunteer IFAs as part of the Moneyplan scheme - check if your local bureau is taking part.

Protect what matters to you, like your loved ones and lifestyle, in case the unexpected happens.

More ways to get covered

Life Insurance

Choose between level, decreasing or increasing term insurance, each designed to offer you peace of mind based on your circumstances.

Life Insurance

Over 50s Life Insurance

If you're aged between 50 and 80 Post Office could help you to leave your family the gift of a cash sum or help towards your funeral costs.

Over 50s Life Insurance

Critical Illness Cover

Add extra protection against the unthinkable by adding Critical Illness Cover to any Post Office Life Insurance policy.

Critical Illness Cover

Free Parent Life Cover

If you have children aged under four years old, you could get £15,000 of life cover free for a year.

Free Parent Life Cover

Still have questions?

You can find more information on life insurance by visiting Post Office life insurance guides and articles.

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