In the UK, it’s not compulsory to buy life insurance when you take out a mortgage, but mortgage brokers do tend to recommend it as an effective way of protecting your mortgage. In fact, taking on a mortgage is one of the most common reasons for getting covered.

Why? Because a mortgage is usually the biggest sum of money you’ll ever borrow in your life, so naturally it’s a debt people are keen to insure as soon as possible. No-one wants someone else to be left liable for their debt, or for their home to be repossessed if they die – instead of being left to their loved ones.

But having a mortgage does not automatically mean you need life insurance. This is a common misconception. The real question is whether or not you have anyone else who'd be left liable for it if you died, or left without somewhere to live. If it's just you on the mortgage and you don't have any financial dependents, life insurance might not be the priority cover for you.

Whatever your circumstances, if you’ve got a mortgage, this guide to life insurance for homeowners will help you unpick the basics.

What is life insurance?

Life insurance is a policy that pays out a tax-free lump sum to your partner, family or person of your choice if you die. If you own a home, you’re likely to have a mortgage – and if you die, this debt could be passed onto your loved ones. Having sufficient life cover means it can be paid off easily and your loved ones can keep your home.

How does life insurance work?

It’s simply an insurance policy that pays out a sum of money if you die. When you buy life cover you agree to pay a monthly amount in return for the lump sum, paid out after your death. If you’re taking out life insurance specifically to protect your mortgage, you might choose to buy decreasing term life insurance, in which case the lump sum paid out can reduce in line with paying off your mortgage. But there are other types of life insurance to consider too.

Why is life insurance important for homeowners?

Because most homeowners have a mortgage – which is a debt that could be passed onto your loved ones if you die. Having life insurance in place means your mortgage can be paid off in one go, and also means your family get to keep your property. The brutal reality is that without life insurance, your home could be repossessed if you still have a mortgage when you die.

If you're a homeowner with a mortgage, life insurance is a simple, logical way to protect it. What’s more, it's often money that’s straightforward to claim if and when you do die – which can’t always be said for any other savings or assets you might leave behind.

Do all homeowners need life insurance?

Not necessarily. If you're the only person on your mortgage and you don't have any financial dependents (like a partner or children), life insurance probably isn't the priority cover to get in place. This is because no-one else would be left liable for the debt or without a home if you died.

Covering yourself in case of illness might be more important in this scenario. If you lost your income because of an illness or injury, you might struggle to keep up with your mortgage payments. Income protection is a way of protecting your mortgage in case this happens to you.

When’s the best time to buy it?

If you have financial dependents who could be left liable for the debt if you die then, ideally, as soon as you get a mortgage – so you're not unprotected at any point. If you don't have financial dependents, we wouldn't recommend buying life insurance until you really need it – so you're not paying for insurance you don't really need.

It's worth bearing in mind that the younger and healthier you are, the cheaper life insurance is. This is because you pose less of a risk to the insurer in terms of having to pay the policy out.

Protect your home with life insurance. To start, select your age bracket:
  • If you die with an outstanding mortgage, your loved ones could be left liable for the debt and your home could be repossessed
  • Life insurance is a simple way to protect your loved ones financially if you've got a mortgage
  • A life insurance payout could pay off your mortgage in one and allow your loved ones to keep your property
What is life insurance?
An insurance policy that pays out a tax-free lump sum to your partner or family if you die. It’s designed to make sure your loved ones would be financially secure without you and your income.
Who needs life insurance?
Anyone who has financial dependents. In other words: other people who rely on your income. If you have a partner or children who’d be financially affected by you dying, you should consider having some life insurance in place.
How much does life insurance cost?
Life insurance is often very affordable, but the cost differs per person. This is because it depends on the cover you buy and how much of a risk you are to insure (based on your age, health and lifestyle). It’s cheapest when you’re young, fit and healthy.
Does life insurance always pay out?
Life insurance will pay out if you die while you’re insured and you were honest about your health when you applied. It won’t pay out if you die after your policy runs out or you cancel your policy – and might not if you meet an exclusion (e.g. many insurers exclude death by suicide within the first year of taking out the policy).
Is it easy to claim?
Claiming on a life insurance policy is straightforward – your partner or family simply claim directly with your insurance company. Making sure they know about your policy and have the details in case the worst happens can be helpful.