Life insurance when buying a house

When buying a house there are lots you’ll need to consider, how you’ll protect it is one of them.

But what protection do you need?

Commonly, when securing a mortgage, new buyers look to life insurance.

But despite popular belief, it’s not a legal requirement to secure life insurance - although it might be a very sensible one.

At Reassured we can help you secure cover to protect your mortgage from just 20p-a-day.

In this article Reassured will clear up any queries you may have about whether you need life insurance when taking out a mortgage…

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Is it a legal requirement to have life insurance with a mortgage?

No, it’s not a legal requirement to take out a life insurance policy when getting a mortgage.

While it’s not a legal requirement, it’s often recommended that you take out a policy.

This is to help protect your mortgage in the event of a worst-case scenario.

If you were to pass away, would your loved ones be able to afford the monthly mortgage payments?

Life insurance offers financial security and provides you with peace of mind that your loved ones will be able to stay in the family home.

You can read our full mortgage life insurance guide here »

Can you get a mortgage without life insurance?

Yes, it’s completely possible to secure a mortgage without a life insurance policy.

Most mortgage providers won’t require you to have a life insurance policy when approving your mortgage.

However, some lenders may also ask that you take out a policy as a precondition for letting you borrow money from them.

In some cases, you may need to take out a policy before your lender releases any funds.

This is so they can protect themselves if the worst were to happen to you.

What insurance do I need when buying a house?

Your house is most likely going to be your largest asset, so it makes sense to take steps to protect it.

This can be done by taking out:

  • Buildings insurance
  • Life insurance
  • Mortgage payment protection
  • Contents insurance

The only insurance you’re required to take out by law when buying a property is buildings insurance.

Buildings insurance

Buildings insurance will protect you against the cost of repairs if your home were to be damaged.

It covers things such as the structure of your home, the roof, walls and windows as well as any permanent fixtures (such as bathroom suites and fitted kitchens).

Unfortunately, this isn’t something we provide at Reassured.

Taking out life insurance will protect your loved ones in the event you were to pass away.

The type of mortgage you have will determine which form of life insurance is most suitable.

Level term life insurance

With level term life insurance, your sum assured (pay out amount) remains fixed throughout the lifetime of your policy.

This means the amount paid out to your loved ones always remains the same.

For this reason, it’s ideal for covering an interest-only mortgage.


Decreasing term life insurance

With decreasing term life insurance your pay out amount will reduce over time.

This makes it ideal for covering a repayment mortgage as your sum assured can reduce inline with your remaining mortgage balance.

Compare Level Term & Decreasing Term Quotes »


At Reassured, we can arrange both level and decreasing term life insurance on your behalf, so get in touch to secure the best deal.

You may also want to consider taking out:


Mortgage payment protection insurance

Mortgage payment protection insurance (MPPI) provides financial protection should you lose your job, become injured or unwell and can't work.

MPPI will cover your mortgage payments for you for up to a year or until you return to work.

Payments will be made in full unless they exceed the upper limit listed in your policy.

This isn’t something we provide at Reassured.


Contents insurance

Contents insurance is designed to help protect the things in your home (your belongings).

It includes the cost of repairing or replacing damaged possessions in the event of a fire, flood or theft.

Some contents insurance policies also protect your belongings when you’re not in the home (such as your phone or laptop).

Again, this isn’t something we provide at Reassured.

Why do you need life insurance on a mortgage?

Without life insurance, if you were to pass away, your loved ones could risk having to leave the family home.

If you were no longer around could your loved ones afford to:

  • Continue to make mortgage payments?
  • Continue living their current lifestyle?

If the right financial protection isn’t in place, their new budget may struggle to meet their new circumstances and could result in the home needing to be sold.

A life insurance pay out can not only cover your remaining mortgage balance, meaning it can be paid off in full, but will also ensure there are minimal disruptions to your family’s day-to-day living expenses.

Losing a loved one is already a difficult time, but life insurance could help to give you peace of mind that your loved ones won’t struggle financially.

If you don’t have dependants and are single, it’s less likely that you’ll need life insurance.

This is because you won’t be leaving a family or partner behind who may struggle to keep up with mortgage payments.

If you pass away as a single person, your property would go to the government.

Difference between life insurance and mortgage life insurance

There’s actually no difference between a standard life insurance policy and mortgage life insurance.

Mortgage life insurance is simply a life insurance policy that’s taken out with its purpose being to cover your mortgage should the worst happen.

Usually, this is a decreasing term life insurance policy that’s set up to mirror your mortgage repayment schedule.

Is it better to have mortgage insurance or life insurance?

Mortgage payment protection (MPPI) and life insurance are two different forms of financial protection that will cover your mortgage.

MPPI insurance is a form of income protection that will cover your mortgage payments in the event of redundancy or serious accident or illness.

Payments will be made in full (unless payments exceed the upper limit stated in your policy, usually a percentage of your annual salary).

Most plans will cover your payments for up to 12 months or until you return to work (whichever comes first). It won’t pay off the outstanding balance of your mortgage.

Life insurance will provide a lump sum pay out if you were to pass away during the term of your policy.

Critical illness can be added to life insurance, allowing you to make an early claim in the event you become seriously ill and unable to work.

All life insurance policies arranged through Reassured come with terminal illness as standard.

This extra layer of protection will allow you to receive an early pay out if you’re diagnosed with a terminal illness and given less than 12 months to live.

A pay out from life insurance, critical illness or terminal illness can be used to pay off the remainder of your mortgage in full.

Mortgage payment protection Life insurance
Offers short term protection Provides long term protection (term policies can be up to 40 years)
Will pay out if you loose your job or become too ill to work Will pay out upon your passing
There are usually upper limits in place on policy Critical illness cover can be added to your policy for an additional fee
Payments may not be made in full if your monthly payment exceeds the upper limit Terminal illness cover will come with a term policy at no extra cost
  Sum assured (pay out amount) can be up to £1,000,000
  Mortgage can be paid off in full


Your mortgage is likely going to be the largest debt you have, so it’s important to have some form of cover in place to protect it.

Which form of cover is best for you will depend on your needs.

If you’re looking for shorter-term cover, MPPI might be the right option.

If you’re looking for long term protection to ensure your loved ones can remain in their home should the worst happen, life insurance may be the right option.

To ensure full cover for your mortgage, it’s likely to be beneficial to have both forms of insurance in place simultaneously.

At Reassured we’ve helped over 814,000 families protect their home by securing them life cover.

How much is life insurance for a mortgage?

How much you’ll pay for your life insurance policy will be based on your personal circumstances.

At the point of application, you’ll be asked questions regarding:

  • Your age
  • Your health and wellbeing
  • Medical history
  • Smoking status
  • Level of cover required (sum assured)
  • Length of cover (the term)

These factors will allow insurers to determine the level of risk you pose and your premium will be calculated accordingly.

Those who’re deemed a higher risk will pay higher premiums than those who’re deemed low risk.

For example, someone who smokes may pay higher premiums than a non-smoker.

Your mortgage provider or estate agent may encourage you to buy life insurance directly from them, but this is because they could earn a commission from you doing so.

This is likely to not be the most cost-effective option as prices can vary between insurers.

To make sure you’re getting the best price it’s important that you compare multiple quotes.

At Reassured we can do the hard work for you and compare quotes on your behalf.

How much mortgage life insurance do you need?

Enter your financial commitments to understand the level of cover you require.

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£121,687 is the estimated average outstanding mortgage per household in the UK.

Our property is generally the largest financial commitment any of us will make.

Your life insurance should cover this significant debt should you no longer be around.
£
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According to Money Advice Service, full-time childcare in the UK now costs £242 a week.

The loss of a parent could result in the need for additional childcare whilst the surviving parent increases their hours to account for lost income.

Your life insurance cover should factor in this additional required outgoing.
£
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The average level of debt (minus a mortgage) in the UK is £15,385.

Factoring in any outstanding debts in your name when arranging life insurance ensures this burden is not passed to loved ones.
£
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You may wish to leave your loved ones an inheritance or lump sum gift upon your passing.

Factoring in the gift amount when arranging your cover will ensure the pay out amount will be sufficient to provide your loved ones with this selfless gesture.
£
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According to SunLife, the average cost of a UK funeral is now £4,417, whilst the total cost of dying is £9,493.

This is a 130% increase over the past 16 years and shows no signs of slowing down.

A significant cost which should be factored into the amount of life insurance you secure.
£
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If you are one of the 65% of the UK who are lucky enough to have savings, this could be used as protection if you were to pass away.

Any pay outs from existing life insurance policies and investments can also be used as financial protection for your loved ones if you were no longer around.

Factor this into your required cover amount.
£ -

Your total cover estimate

£ 0

Let us find your best quotes.

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The below shows the average life cover cost for a 30-year mortgage depending on the age of the applicant[1].

Age Monthly cost for mortgage life insurance
30 £5.50
35 £7.80
40 £12.60
45 £19.29
50 £32.72

How long should I get life insurance for?

How long your life insurance should last for will very much depend on your own personal needs and circumstances.

When taking out life insurance to protect your mortgage, you’ll align your policy with your mortgage term.

For example, if you have a mortgage term of 30 years, your life insurance policy should for at least 30 years.

It’s also important to have your cover mirror your remaining mortgage balance, so your sum assured should at least be the same amount as your mortgage.

If you have other aspects of your life that you need to protect, such as family living costs or funeral expenses, you may choose to have your policy last longer than your mortgage term (for example, until your children are financially independent).

It’s ultimately up to what you believe will best meet the needs of you and your loved ones.

Do I need life insurance if I don’t have a mortgage?

If you don’t have a mortgage, whether or not you need life insurance will very much depend on your own personal needs.

Protecting a mortgage isn’t the only reason to take out a life insurance policy.

Life insurance can also protect many other aspects of your life should you pass away, such as:

  • Covering rising funeral costs
  • Childcare costs
  • Family living costs
  • Rental expenses
  • Clearing outstanding debts

If you have people who depend on you financially, such as a partner and children, you may want to take out a policy to secure their financial future.

Or you may want to take out life insurance to ensure your loved ones won’t have to worry about covering rising funeral costs.

At Reassured we believe that most people would benefit from having some form of life insurance in place.

Compare quotes to protect your mortgage

Comparing life insurance quotes to protect your mortgage is essential in order to secure the best deal.

At Reassured, our award-winning team can take you through the whole application process, explain your options and compare quotes on your behalf.

Life cover through Reassured starts from as little as 20p-a-day.

Why not get in touch today for your free no-obligation quotes.

Compare Life Insurance Quotes » Save Money

Sources:

[1] https://moneytothemasses.com/quick-savings/insurance-2/life-insurance/much-100000-life-insurance-cost/

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