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Mortgage protection insurance explained

Find out everything you need to know about mortgage protection.

Mortgage repayments are one of the largest monthly financial outgoings for most people. Without protecting it, you may run the risk of losing your home if you were unable to make the repayments.  

Mortgage protection is insurance that covers your mortgage if something unexpected happens. If you become terminally ill, or pass away, both the repayments and the interest would be paid off.

Do I need life insurance to cover my mortgage? 

No, it’s not compulsory to get life insurance to cover your mortgage. The only compulsory insurance you need when buying a house is buildings insurance.  
Check with your mortgage provider first though. There are some that do require you to have mortgage protection in place. 

Life insurance can include mortgage protection, and it’s worth thinking about. Especially if you have family or dependents that rely on your income. 

More on the differences between mortgage protection and other insurance options

When should I think about getting mortgage protection insurance?

There are a few reasons why you might consider mortgage protection:

If you have a partner or are getting married

Would your savings or your partner's salary be enough for them to cover the mortgage? If you have mortgage protection and something happened to you, your partner would be able to continue paying it off. 

Becoming a parent

An insurance policy could ensure that your family could keep their home if something happened to you. 

When you may not need mortgage protection 

If you’re single, live alone, or have no dependents, you may not need mortgage protection. This is because your property could be sold to repay the mortgage if you passed away. 

Mortgage protection policies explained

Mortgage protection is a type of life insurance, tailored to those who have a mortgage. The more of your mortgage you pay off, the less amount of cover you need. 

How is your mortgage protection cover amount calculated?

The premiums you pay will depend on several factors. These include your:
  • Age  
  • Income  
  • Health  
  • Type of job or employment contract  
  • Monthly mortgage amount  
  • Lifestyle choices, for example if you smoke 
  • How much remains on your mortgage repayment. 
Insurance companies may ask for other details depending on the type of cover you choose. 

Insurers will usually class different jobs within different risk categories. If your job's classed as high risk, for example, your premiums may be more expensive.  

Is mortgage protection insurance tax-deductible?

If you purchased insurance on or before 13 March 1984, you should be able to claim tax relief on life insurance. Any insurance bought after this date isn’t tax-deductible.  

There are some exceptions:  
  • If you gain interest on the lump sum between the death of the plan holder and the paying out date 
  • An estate of which the gross value does not exceed the Inheritance Tax Threshold (IHT) of £1million.
For more on this, go to the Government’s Gains on UK life insurance policies help sheet.  

Need-to-know terms when buying mortgage protection insurance

Buying insurance can be confusing. Here are a couple mortgage protection terms explained:  
  • Exclusion period - this is the time between the start of your policy and when you’re able to make a claim. Different types of cover will have different exclusion periods 
  • Back-to-day-one policy - this is a policy that will pay out from the first day that you can’t work. 
For more help with common insurance terms, read our insurance glossary.

The difference between mortgage insurance and other products

Mortgage life insurance versus life insurance

Mortgage life insurance or mortgage protection insurance, is a type of life insurance. 

Life insurance pays out if you die or become ill during the policy term. Mortgage protection is the same, but it only covers your mortgage repayments. 

There are two types of life insurance:  
  • Term life insurance - covers you for a specific amount of time determined by you. Mortgage protection is a type of term life insurance. That’s why it’s also called decreasing term life insurance 
  • Whole of life insurance - lifelong cover that's guaranteed to pay out at the time of your death.  

Mortgage protection versus income protection insurance

If you get sick or injured and can’t work, income protection insurance will pay a part of your salary. These payments can go towards anything like your mortgage, childcare and living costs.  

Mortgage protection insurance only covers the costs of your mortgage repayments. For this reason, income protection tends to be more expensive than mortgage protection. 

Mortgage life versus serious or critical illness cover

Serious or critical illness cover pays out a cash lump sum to you and your family if you become seriously ill. It usually covers illnesses like heart attacks, strokes and cancers.  

Serious or critical illness cover pays out one lump sum. Mortgage protection insurance pays out monthly. Serious or critical illness cover, unlike mortgage protection, doesn’t pay out if you pass away. 

It's possible to combine these insurance options according to your requirements.  

Learn more about mortgage protection here, or get a mortgage protection quote here

Relevant guides and articles

  • Income protection insurance

    Income protection insurance covers your monthly salary if you get sick and can't work.

  • Whole of life insurance

    Whole of life insurance covers you for your entire life. It guarantees a payout to your loved ones when you pass away or become terminally ill.

  • Serious and critical illness cover

    Serious and critical illness cover pays out a lump sum if you are diagnosed with a serious condition. The condition may not be life threatening, but it still impacts your life.