Do you need life insurance to get a mortgage in the UK?
Do you need life insurance to get a mortgage and what happens to a life insurance policy when the mortgage is paid? We answer these questions and more.
Key takeaways
- In the UK, having life insurance is not a legal requirement to get a mortgage, but some lenders may require it as a condition for approval to protect both the borrower and the lender in case of death.
- Life insurance offers a financial safety net for families, allowing them to pay off the mortgage and keep ownership of their home in the event of the borrower's death.
- There are two types of life insurance suitable for mortgages: decreasing term insurance, which reduces in value over time and is ideal for repayment mortgages, and level term insurance, which maintains the same payout amount and is better suited for interest-only mortgages.
Buying a home is exciting. It’s also probably the most expensive purchase you’ll ever make. Sadly, few of us can buy a house outright, so we take out a mortgage.
Repaying a mortgage is manageable when you’re working and receiving a regular income. But if that income suddenly stopped, paying back the debt could get very difficult. Life insurance is one way to protect your family from having to sell your home if you died and could no longer afford to pay the mortgage.
In this guide, we look at the benefits of getting life insurance when you take out a mortgage. And what types of life insurance are suitable for a mortgage.
Is it a legal requirement to have life insurance with a mortgage?
No, it’s not a legal requirement to have life insurance when you take out a mortgage. Or at any stage during paying back your mortgage.
But some lenders may only offer you a mortgage if you agree to take out life insurance. This protects both you and them if you die while the mortgage is in place. Your family can use the payout to pay off the mortgage and stay in their home.
Having life insurance in place is particularly important if you have an interest-only mortgage. Because you're only paying off the interest, the full loan amount remains outstanding until the end of the term. For this reason, lenders may strongly recommend that you take out mortgage protection in the form of life insurance.
Lenders may also request that you take out buildings insurance. This covers you if your home is destroyed because of fire or flood. It’s separate to life insurance as it pays for rebuilding your home if it’s damaged.
Does having life insurance help you get a mortgage?
Having life insurance won’t necessarily help you get a mortgage. The mortgage lender will take into account your credit history, your income and savings and the size of your down payment first.
Given the size of the debt though, some mortgage lenders want to know how you’d pay it back if you died. So sometimes they’ll ask you to take out life insurance as a condition of having the mortgage.
What are the benefits of getting life insurance for a mortgage in the UK?
Taking on a mortgage is a big financial decision. And you're likely to be paying it off for twenty years or more. During this time, anything could happen. Although you may not want to think about it, you could pass away before paying off your mortgage. So, there are practical and emotional benefits to having life insurance.
Financial safety net
Many life insurance policies, including VitalityLife plans, can pay out a lump sum if you die. Or, where terminal illness cover is included, if you're diagnosed with a terminal illness and meet policy conditions. When the claim has been approved, your family – or a trust, if you’ve set one up – will receive the money. This money can be used to help pay off the remaining mortgage debt, giving your loved ones financial support when it’s needed most.
Peace of mind
Losing a loved one is a traumatic event. And one which can be compounded if money is a worry. Having life insurance in place provides a bit of breathing space. Your family will know at least they’re secure in their home. Because, once the mortgage is paid off, the home belongs completely to them.
Secure your mortgage
When securing your mortgage, it may be strongly recommended that you have life insurance in place. It’s useful for both you and the lender, as it adds a level of protection to an expensive asset. Your family could benefit from keeping the home. The lender may take comfort from knowing there is insurance intended to help repay the mortgage, if you die during the policy term.
Prompt payout
When you make a life insurance claim, it can be paid out fairly quickly, especially if the policy is placed in trust. This means that your family won’t need to drain their savings to carry on paying the mortgage. The lender can be repaid quickly, and your savings remain untouched.
Learn more: Life insurance and trusts explained
What life insurance do I need for a mortgage?
There are several different life insurance mortgage protection plans. Which one you take out may depend on the type of mortgage you have.
Decreasing term insurance
Decreasing term life insurance is a type of life insurance where the payout reduces over time. If you die or are diagnosed with a terminal illness while the plan is in place, your loved ones will receive a tax-free lump sum. As the payout reduces over time, it’s suitable for paying off a repayment mortgage. It’s sometimes also called mortgage protection insurance.
With a repayment mortgage you pay back both the interest on the loan and some of the capital. This means your debt gets smaller over time. With decreasing term insurance, your payout gets smaller over time as well.
So, if you die five years into a 25 year plan, your loved ones will receive a larger payout than if you die 20 years into a 25 year plan. But as your mortgage should have reduced as well, your family will pay back less to the lender.
The amount they receive will eventually reduce to zero at the end of the plan. So, you’ll need to check that as your life insurance cover decreases, it’s still enough to pay off your mortgage. Because the payout reduces as you get closer to the end of the plan, it can make it cheaper to buy than level term insurance.
Learn more: What is decreasing term life insurance?
Level term insurance
This insurance doesn’t decrease over time like mortgage protection insurance. It stays at the same level throughout the time you have it in place.
This makes it a good option for interest only mortgages. With this type of mortgage, you only pay back the interest on the loan, not any of the capital. This means the original loan remains unpaid until the end of your mortgage term.
If you were to die during this time, your family would need to carry on paying the interest on the loan. And find a way to repay the capital without your income to contribute. If you took out a level term insurance policy for the amount of the original loan, they could pay back the mortgage in full.
Learn more: What is term life insurance?
Here’s how they compare
| Decreasing term life insurance | Level term life insurance | |
|---|---|---|
| Payout on death | Reduces each year | Stays the same |
| Suitable for | Debts that reduce over time, like a repayment mortgage | Debts that don’t reduce, like an interest only mortgage |
| Cost | Tends to be cheaper than other types of life insurance | Very affordable depending on your age |
| Cover | May not provide enough cover as you get towards the end of the plan | Should provide enough cover throughout the plan as long as the debt doesn’t increase |
| Premiums | Stay the same throughout the term of the plan | Stay the same throughout the term of the plan |
| Cash in value | No cash in value. When the plan ends so does your cover | No cash in value. When the plan ends so does your cover |
What happens to a life insurance policy when the mortgage is paid?
Your life insurance and your mortgage aren’t linked, so your insurance won't automatically stop when you pay off your mortgage.
When you set up your insurance, you choose how long you want it in place for. If you’re paying back your mortgage over 25 years, it makes sense to have your insurance in place for that amount of time too. So, as you get to the end of your mortgage, your insurance ends as well.
But, if you’ve taken out life insurance for say 30 years, your insurance stays in place for that whole time. Even if your mortgage is paid off.
This is also true if you pay off your mortgage early. Your insurance cover will continue until the end of the policy term. So, if you have your insurance in place for 25 years but pay off your mortgage after 20 years you’ll still have life insurance cover for five more years. And you’ll need to continue paying your premiums for this time.
If you decide you no longer need life insurance you can cancel your policy. But remember, if you then take out a new life insurance policy, it could be significantly more expensive. This is because you’ll be that much older than when you took out your original life insurance.
There’s also no cash in value to most life insurance policies, so there’s no financial benefit to cancelling it early. Although you’ll no longer need to keep paying the premiums.
An alternative to cancelling is to transfer your life insurance to a different type of policy. Or make changes to your existing cover. For example, you could decrease the level of cover you want or change the length of time you’re covered for.
Vitality life insurance
Want to know more about life insurance or thinking about taking out a policy? Here are some of the benefits of taking out life insurance with Vitality:
- A brand you can trust - In 2024, we paid out 98.9% of all Life Cover claims.*
- Get a lower monthly premium upfront when you add Optimiser to your plan. Keep your premiums low when you stay active.
- Access to Vitality partner discounts and rewards.
- Get free no-obligation advice. Our advisers offer expert advice to help you make the right decisions.
You're not alone in choosing Vitality. Over 2 million lives in the UK are now covered by our insurance, and we’re here to support you too.
Ready to take the next step? Getting a quote is simple and takes just a few minutes.
*VitalityLife Claims and Shared Value Report 2025
