Choosing the right insurance for a mortgage in the UK

Did you ever think ‘what happens to my family if I have a loan to pay and I’m not there anymore’. We’ve put it lightly there, what we really mean is, what if you died unexpectedly and your family is burdened with having to pay off the loan? It may seem a bit morbid to put it across like that, but it is a fact and many families are faced with situations such as this, an unexpected burden on their shoulders. In this article, we’ll show how the right type of insurance for a mortgage can make all the difference between ‘resting easy’ and your family being burdened with a massive repayment to the bank.

Mortgage life insurance

Let’s begin with the most obvious, life insurance. This type of insurance is a long-term insurance payout. Depending on the length of your mortgage term, life insurance for mortgages, better known as Mortgage Life Insurance, can be a decreasing term payout. Which means the amount being paid will reduce annually with every payment made. In this type of mortgage protection, the reducing payouts will be carried out for the full term of the mortgage term till the full mortgage is paid up.

Usually, the total payout of a mortgage life insurance policy combines both the interest and the principal amount. However, if the mortgage has been set as an interest only repayment scheme, the payoff will not be a reducing repayment scheme, instead it will pay off only the interest component and the capital will be paid off as a total at the end of the term. While it seems that either of these schemes work out to be very much the same thing, it might be best to check with your mortgage broker for any advantages or disadvantages between them so that you get the most out of a Mortgage Life Insurance.

Critical illness cover

This type of insurance is particularly great since it provides a lump sum payout in the event of you being diagnosed with a critical illness (such as a heart attack, stroke or cancer) and being unable to work. Critical illness payouts are also made on certain disabilities. In the event of disabilities, some insurance firms in the UK may have clauses including or excluding payments depending on the disability.

Illnesses can strike without warning. If you are in the midst of paying back a mortgage, and you are incapacitated due to a debilitating illness, it is obvious that you won’t be able to work and generate an income. It is at this point that a critical illness cover can really make the difference. The critical illness cover payout will help you pay off your medical bills. In addition, since the payout is lump sum, you will also be able to sustain your ongoing medical expenses such as medicine purchases. The payout can be utilised to spend on anything you like, such as school fees, household expenses, utility bills, or any other obligatory expense.  Unlike a conventional insurance policy, critical illness cover can certainly ease the burden of paying off a mortgage with it’s lump sum payout.  

Income protection

If you are rendered helpless due to a severe illness or accident, income protection could be the right type of insurance to obtain. Unlike the others described in this article, income protection can be very specific and be obtained to cover whichever policy you may think is important to your particular situation. e.g., sickness or accident

Income protection is a term insurance which means it has a valid period of time. And you will be able to claim the money only in the event of you meeting with a situation as stated in the policy. As the name implies ‘income protection’ is to protect those who cannot generate an income. The payout is fixed during the entire term of the policy. And monthly premiums are carried out monthly. There are some income protection policies where the premium payments are fixed rates or a variable rate. Income protection is activated at the time you are not able to generate an income due to an accident or illness. You can choose how your payout need to occur. It can be set to be paid on a monthly basis for a set number of years. This is ideal if you are without a job and need a regular monthly income. There are other options that you may like to look at when choosing this insurance method. You may need to discuss this with a mortgage broker or adviser to identify which suits you better.


Choosing the right type of insurance is very important, particularly when you have a mortgage to payoff. While there are numerous insurance schemes available, the 3 we have listed above are the most popular in the UK when it comes to preventing you and your family from facing a disastrous situation occurring due to unforeseen circumstances. Speak to a responsible and renown adviser before embarking on a mortgage protection scheme. Reap the most out of your investment and stay safe in the bleakest of times, that is what the right mortgage insurance is meant to do.

 * Approved by The Openwork Partnership on 22 August 2023

Leave a Reply