Comparing Life Insurance & Mortgage Life Insurance

You may have heard of mortgage life insurance, but you’re not quite sure how it differs from your average life insurance policy. Not to worry - we’re here to help you make sense of it all.

We know that you want to make smarter life insurance choices for your family. We also know that financial jargon can be confusing, to say the least. So we want to help you figure out what’s what when it comes to life insurance policies. Now, let’s dive in and find out how these policies work.

What is life insurance?

Let’s begin with the very basics; life insurance is a type of insurance policy that allows you to put some financial protection in place for your loved ones should you pass away unexpectedly. 

Typically, a life insurance policy will cover you for a set term. You will decide for how long you would like to be insured under your policy - this could be a 20 or a 30 year period for example. You must also decide on a benefit amount - that’s how much money is paid out when you die. Your benefit amount combined with your age, term period, health and lifestyle will determine how much you pay in monthly premiums. 

The rate of monthly premiums you pay can be fixed. Depending on the insurer, you may have the option of choosing an increasing benefit amount, meaning your monthly premiums increase gradually along with your benefit amount. This helps combat the effects of inflation on the value of your policy.

Who needs life insurance?

If you’re worried that your family would struggle to keep up with living costs and household expenses if you were to pass away, then you could consider taking out a life insurance policy. If you keep up with your monthly payments, you know that your family could have a financial safety net to fall back on should you pass away.

What is mortgage life insurance?

Mortgage life insurance is a type of decreasing term life insurance policy that caters to the needs of anyone with a large loan, such as a mortgage, that decreases over time. It can help you to protect your loved ones in the case that you pass away before your loan has been paid in full.

When you take out a mortgage life insurance policy, you choose how much money your family is paid out if you die (the benefit amount) and the number of years for which you are insured (the policy term). You will pay a rate of monthly premiums and if you die within the policy term, your family will receive a lump sum payment to help cover the cost of the remaining repayments on a large financial commitment. What makes this policy type different is the fact that the benefit amount reduces over the duration of the policy, which is how it differs from your typical life insurance. A mortgage life insurance policy is generally used to cover large financial commitments such as a mortgage or loan, which also reduce over time as they are paid off.

What else should I know about mortgage life insurance?

With mortgage life insurance, you’ll be given a basic ‘decrease’ rate for your benefit amount. This rate is not tied into your exact mortgage. It’s up to you to choose the benefit amount that is suitable for your situation.

You may find that the final benefit amount your family receives in the event of a claim could fall short or is over the balance of your mortgage since interest rates can affect how your policy reduces over time.

Who needs mortgage life insurance?

While it’s not always mandatory for mortgage applicants in the UK to have some form of mortgage life insurance in place, it could be a good idea to protect yourself in case something happens and you can no longer pay the remainder of the loan.

What are the key differences between life insurance and mortgage life insurance?

The main difference between these policies is the decreasing benefit associated with mortgage life insurance. As you pay off a large loan, the outstanding payments reduce over time, as does your need for a larger benefit amount. When it comes to life insurance, the amount you are covered for is generally fixed for the length of your policy.

When you take out a standard fixed term life insurance policy, you choose a benefit amount and a term that suits your family’s more general financial needs. Typically, these needs stretch beyond loan repayments. You may need a life insurance policy that will help your family keep up with living costs if you pass away.

As you can see from the following chart*, the sole difference is the decreasing benefit amount.


Life InsuranceMortgage Life Insurance
Age Range (starting)18-6518-65
Max. Benefit £2million depending on age£2million depending on age
Min. Benefit£50,000£50,000
Medical RequiredDepends on insurerDepends on insurer
Joint Plan AvailableYesYes

Level Premium


Yes (Increasing premium may be available depending on the insurer)Yes
Optional Critical Illness CoverYesYes

Life Insurance >Mortgage Life Insurance >

Can I take out a joint policy for both insurance types?

Yes with insurers on the Choozi panel, you can take out a joint policy for you and your partner with our life insurance and mortgage life insurance policies. If you have a joint policy, the life insurance policy pays out on both deaths. With mortgage life, it tends to pay out only when the first person passes away.

How can I ensure my family is fully protected from outstanding debt?

The life insurance policies we offer don’t cover you if you fall ill or you are severely injured to the point where you can no longer work. Fortunately, you do have the option of adding on critical illness cover to your policy. This will provide a payout should you become critically ill or injured. What’s covered by critical illness varies depending on the provider. It is typically used to help cover things such as lost wages, costs associated with your recovery and medical expenses.

In the case that you choose to add critical illness to your policy, it will pay out when you become critically ill if you pass away during the policy term. With this type of insurance cover, the amount of cover you choose is only payable once. This is known as the first event. So if you are diagnosed with a disease on the list of diseases specified by the insurer you will be paid the full amount of your critical illness benefit. Once this payment has been made you are no longer covered under life insurance. 

How do I know which one is right for me?

If you’re the primary breadwinner or you feel your family would find it difficult to keep up with day-to-day expenses without the contribution of your paycheck, a life insurance policy could be the right choice for you. If you’re concerned that your family would struggle to keep up with loan or mortgage repayments if you die, then you could consider mortgage life insurance as a means of helping protect them.

Now that you have a better idea of what kind of policy might suit your needs, you can start comparing insurers. Choozi is a free, no-obligation service and all it takes to get started is to fill out one simple form.


*Comparing like for like policies from insurers on Choozi panel. 01/06/2020


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