Do I Need Life Insurance for a Mortgage?

Last updated: 22/06/2023 | Estimated Reading Time: 7 minutes

There is no legal requirement to take out life insurance when applying for a mortgage. However, that doesn't mean there are no benefits to getting life insurance before or after you buy a home.

It's very common for people to consider taking out life insurance when buying a home, especially if they already have, or are planning to start, a family. Life insurance can give you the peace of mind you need to go ahead and accept a mortgage offer, safe in the knowledge that your loved ones will be protected should something ever happen to you.

In this blog, we'll help you to decide whether taking out life insurance is right for you and how the right policy could support you in your home ownership journey.

In This Guide:

Do You Need Life Insurance to Get a Mortgage?

The short answer is: no. Thousands of people across the UK have successfully applied for mortgages with no life insurance, but for some people, it could be helpful.

If you’re struggling to get a mortgage, some lenders may ask you to buy life insurance before they make you an offer. Most lenders don’t like to give mortgages to people that they consider a high credit risk, so if you have a history of unpaid debts or financial instability, you may find it hard to secure a traditional mortgage.

Life insurance could help you to be deemed as less of a risk to a mortgage lender, as the right policy will act as a safety net should something prevent you from making payments.

What Type of Life Insurance Do You Need For a Mortgage?

If making mortgage repayments is your primary concern when thinking about your family’s financial future, mortgage life insurance could be the right policy for you.

How Does Mortgage Life Insurance Work?

Mortgage life cover will typically pay out after you die and can help your family to afford the mortgage on their home. Each life insurance policy will be slightly different and may be customisable to suit your needs.

Typically, mortgage life insurance can:

  • Pay off your mortgage after you die, allowing your family to continue living in their home regardless of their financial situation.
  • Cover your mortgage repayments should you become seriously or terminally ill (see critical illness cover.)
  • Reduce over time to keep your premiums as low as possible while still providing you with the right amount of cover for your mortgage term. This is known as decreasing term life insurance.

Depending on the cover you require (or what your mortgage provider recommends), you may need to consider taking out a combination of mortgage life insurance and critical illness cover. Alternatively, you may decide that a broader life insurance policy would suit you best but you’d still like to have mortgage payment protection insurance as an add-on.

Please Note: Not all insurance providers we work with offer all types of policies. Please do your research and compare quotes before proceeding.

I Have No Dependants, Do I Still Need Mortgage Life Insurance?

Life insurance is all about protecting your loved ones, so if you don’t have anyone that depends on you to support them financially, taking out a policy may not be the right decision for you.

However, everyone’s situation is different, so we’ve put together some common scenarios where life insurance could be of use even if you don’t have any dependants in the traditional sense.

Buying a Home With Your Partner

You might not consider your partner to be a dependant, especially if they have a stable source of income. However, it’s important to think about how they would be impacted if you were to die or become seriously ill. In most cases, couples buying a home together rely on their partner’s income to help them make mortgage repayments.

If you know your partner would struggle financially without the money you bring to the relationship, mortgage life insurance could be a great option to protect your other half. In these situations, joint life insurance could make monthly premiums more manageable while giving both you and your partner more financial security.

Supporting Your Adult Children

If your children are grown up and earning money for themselves, you may not be as worried about your mortgage repayments as you would be if they were still under the age of 18. But take a moment to think about what would happen if you were to die and your children inherited your home - would they be able to make the payments on your mortgage or would they be forced to sell up?

Mortgage life insurance can give your children more financial security when inheriting a property that you still have a mortgage on, especially if they still live at home or rely on having their bedroom to sleep in when in between jobs. It’s now difficult for many young adults to find their footing on the property ladder – mortgage life insurance can help you to ensure they’ll always have a roof over their heads.

Safeguarding Your Future

While life insurance is designed to protect your family after you’ve died, life insurance with critical illness cover could help you to feel more secure in your finances while you’re alive.

Serious illnesses can occur unexpectedly to anyone, so it’s important to think about whether you’d be able to afford your mortgage repayments if you were no longer able to work. Life insurance with critical illness cover could either pay you a lump sum of money or regular monthly income to help you cover your living costs, including your mortgage.

Mortgage Life Insurance for Landlords

Landlords can benefit from life insurance just as much as families who are living in the property they own. Whether you’re temporarily renting out your home or have purchased an investment property with a mortgage, landlord life insurance can give you more security in your financial situation. Keep in mind that if you have more than one mortgage, your life insurance premiums may be higher to cover the total costs.

Do I Need Any Other Types of Insurance With a Mortgage?

Regardless of whether mortgage life insurance is right for you, there are other types of insurance that you may need when buying a home or investment property. These include:

  • Buildings Insurance: This is a legal requirement for anyone buying a home with a mortgage and covers the costs of repairing any structural issues and damages (typically included as part of home insurance.)
  • Contents Insurance: Suitable for both renters and homeowners, contents insurance will pay out if something happens to your belongings e.g. flood/fire damage or theft.
  • Landlord Insurance: Usually encompassing both buildings and contents insurance, landlord insurance also protects you against financial loss if your tenant fails to pay rent.

Do I Need Life Insurance If I Don’t Have a Mortgage?

There are many different reasons for taking out life insurance and a mortgage is just one of them. If you have family members that would be left in a difficult financial situation if you were to die, life insurance is worth considering. The right life insurance policy can help your family members to cover their rent, utility bills, groceries, child care and more.

Find Mortgage Life Insurance That’s Right For You

If you think a mortgage life insurance policy could be right for you, Money Expert is here to support you on your journey. Explore our helpful guides to learn more about different types of life insurance policies, or go ahead and get a quote from our team.