Do you need life insurance for a mortgage?

Buying a house can be an exciting but complicated time, especially if you’re a first-time buyer. But with so many things to consider, it might be challenging to know what you really need. 

It may be helpful to know that legally, you don’t need to buy life insurance to get a mortgage.

However, it could be reassuring to have life insurance, providing a financial benefit to your loved ones in the event of your death. This could be used to pay off, or at least support payments on your mortgage, providing one form of stability during a difficult time.

  • Whether you need life insurance for your mortgage might depend on your individual circumstances. Legally, you don’t need to get life insurance to secure a mortgage, but there may still be reasons why you might need cover.

    You’re buying a home with your partner

    Buying a house as a couple is a major step and comes with a lot of responsibility. When you take out a mortgage, you may need to consider whether your partner could afford to pay the remaining balance by themselves if you passed away unexpectedly.

    If your dependants couldn’t afford to keep up the mortgage payments without you, your lender may ask them to resell the house to recover the debt .

    Life insurance can help prevent more disruption if you were no longer around, helping relieve the financial burden on your loved ones. Joint life insurance  is just one option for securing cover if one of you passes away, using one policy to cover two people. Or, you could both take out individual life insurance cover.

    You’re a landlord

    If you own property and rent it out as a landlord, you may also choose to protect your investments with life insurance. Especially if you have mortgages against these assets.

    It’s important to note that mortgage life insurance is not the same as landlord insurance. Mortgage life cover is there to provide your family with financial support if you die. Landlord insurance includes specific buildings insurance and liability cover that isn’t connected to the event of death.

  • Even though you may not need life insurance to get a mortgage, there are various types of insurance you might like to consider:

    Mortgage life insurance

    There are various types of life insurance, including dedicated mortgage life insurance.

    Decreasing term life insurance could be a cost-effective option for people with a repayment mortgage. The potential payout decreases over time, running in parallel with your mortgage, which also reduces with each repayment.

    Level term life insurance may be suitable if you have an interest only mortgage, or you’d like extra protection, supporting your family financially when you can’t.

    Housing costs are often the largest single household expense, so knowing it will be taken care of in the event of your death could be very reassuring for you and your family.

    Life insurance

    General life insurance policies could be used to cover a mortgage, other financial commitments, or just to provide financially for your family’s future. 

    Learn more about life insurance for families.

    There are different options available, including level, decreasing and increasing term life insurance.

    Explore all types of life insurance.

    Critical illness cover 

    While not a life insurance policy, critical illness cover could potentially pay out a cash lump sum which might give you a financial safety net. You could use it to keep up mortgage repayments if you fell ill with something covered by your policy. That way, you and your loved ones can focus on your health.

    Be aware that Life Insurance and Critical Illness policies have no cash in value at any time. This means if you get to the end of the policy and no claim has been made, it will end, and you'll get nothing back. Also, if you don't pay your premiums the policy will end, and you'll get nothing back.

    To be eligible for our Life Insurance, you must be a UK resident aged between 18 and 59.

    Scottish Widows – who are also part of Lloyds Banking Group – arrange our life insurance policies. They are our life insurance experts, helping to protect what matters most for over 200 years.

  • You may want life insurance even if you don’t have a mortgage. For example, if you have dependants to support, or other debts to cover.

    Life insurance is an important consideration if anyone relies on you financially, making sure they’re provided for when you can’t be there. Your life insurance payout can help your loved ones maintain their current lifestyle if something was to happen.

    Alternatively, you should consider whether critical illness cover is right for you instead. It provides a cash lump sum which could help with the costs of managing a critical illness and the adaptions you may need to make to your lifestyle or home.

    The younger and healthier you are, the more affordable life insurance could be.

    Read our guide for more information about what life insurance is and how it can help.

 
Frequently asked questions

Frequently asked questions

  • No, taking out life insurance for a mortgage is not a legal requirement and your mortgage provider won't ask you to buy it. However, taking out buildings insurance may be a legal requirement as part of your mortgage agreement.

  • Yes, but before you cancel a life insurance policy, there are a few things to consider:

    • The potential impact on your loved ones if the worst were to happen, but you no longer had a life insurance policy in place.
    • Any impact to your mortgage, where your lender has stipulated that your mortgage deal is subject to having life cover in place.
    • The increased cost of securing a new policy in future. Factors like your health and advancing age will affect the cost of any new cover you purchase.

    It may be worth speaking to your insurer about alternatives to cancelling your policy. Some insurers may allow you to transfer or make changes to your policy.

    If you really want to cancel, you could purchase an additional policy before you cancel the original one, just to make sure you’re not left without cover in place.

  • You may also need buildings insurance to comply with your mortgage conditions, protecting  the value of the mortgaged property. It can offer you financial cover in case of structural damage. 

Want to find out more?

Explore more information on life insurance and critical illness. Request a tailored quote or call back to discuss your options.

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