Do you need life insurance when buying a house?

You’re not required to have life insurance when buying a house, but many homeowners choose to take out a policy to help protect their mortgage.

If something were to happen to you unexpectedly, a life insurance policy could:

  • Help to pay off your remaining mortgage
  • Ensure that your family can stay in their home
  • Offer vital financial security for loved ones

While it’s not a legal obligation, making sure you have life insurance in place when getting a mortgage could be one of the most important decisions you’ll make.

In this guide, we explain why you might need life insurance when buying a house, as well other types of insurance you may need when looking to protect your home.

Mortgage life insurance starts from just 20p-a-day through Reassured † . Get in touch for your free, no-obligation quotes.

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Life insurance for a mortgage: Quick summary

  • It’s not a legal requirement to have life insurance for a mortgage, but it’s often strongly recommended by lenders and financial advisors due to the potential risk to the lender as well as your family
  • Your mortgage is likely to be the most significant debt you’ll ever have, so it’s important to make sure that it won’t be a financial burden to loved ones if you pass away before it’s paid off. This is why buying a property is a good reason to get life insurance
  • Decreasing term life insurance (also known as mortgage life insurance) is the most common type of policy taken out to help cover a mortgage, but level term life insurance could also be suitable for this purpose
  • While life insurance is an additional expense on top of your mortgage, securing a policy sooner rather than later will ensure that you can lock-in the cheapest possible premiums for the lifetime of your policy
  • Mortgage lenders and financial advisors may encourage you to buy life insurance directly through them, but this won’t provide you with the best deal. Comparing quotes from multiple insurers will help you to find a suitable policy
  • The average size of a mortgage in the UK in 2024 is £127,140 and the average monthly mortgage repayment on a house is £1,202[1]

Why should I consider life insurance for a mortgage?

Generally, you should consider life insurance for a mortgage if you have a partner, young children or other dependents who rely on you financially.

Without your contribution towards the mortgage, could your partner afford to:

  • Continue to pay the mortgage alone?
  • Maintain their current standard of living?

In the worst-case scenario, if they couldn’t keep up with the monthly repayments on their own, they could be forced to sell their home.

This is where life insurance offers a lifeline. The pay out can help to pay off the outstanding debt and ensure there’s minimal disruption to your family’s current lifestyle.

It’s difficult to think about these circumstances, but having financial protection in place can give you peace of mind, knowing that there’s a safety net for your loved ones no matter what happens.

If you’re not buying a home with a partner (or anyone else), and you don’t have children, it’s less likely that you’ll need life insurance for a mortgage.

Although, you may still consider taking out a policy if you want to gift your home to loved ones after you’re gone, and/or cover inheritance tax or funeral fees.

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Can you get a mortgage without life insurance?

Yes, it’s completely possible to get a mortgage without life insurance.

In the past, many lenders would insist that you have life insurance as part of your mortgage agreement, but this is no longer the case.

Life insurance is a separate product that you’re free to take out if (and when) you choose to.

Compare quotes for free today through Reassured and see if we can help you save money.

Life insurance for a mortgage calculator

How much life insurance do you need to protect your mortgage and other costs for your family? Use our handy calculator to work out your ideal amount of cover.

In the UK:

  • £183,955 was the average mortgage loan for new buyers in 2023
  • £127,140 is the average mortgage debt
  • £1,202 is the average monthly mortgage repayment
  • £281,000 is the average house price
  • 25 years used to be the standard mortgage term, but many new buyers have terms that last longer than 30 years[1]

How much mortgage life insurance do you need?

Enter your financial commitments to understand the level of mortgage life insurance you require.

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£137,934 is the estimated mortgage debt per household in the UK.

The purchase of a home is likely to be the largest financial commitment any of us will make in our lifetime. Your life insurance should cover your remaining mortgage balance to allow your loved ones to stay in the family home should anything happen to you.

Source: Moneynerd.co.uk
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The average monthly household budget in the UK is £2,548 (that’s £30,576 per year), which is spent on transport, food & drink, utilities (gas, electricity, water etc), clothing, council tax and leisure activities.

With energy prices hitting a record high and the cost of living rising sharply in the UK, you may wish to factor in utility bills and family living expenses into your cover.

Source: Nimblefins.co.uk
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The average personal debt of UK adults has risen to £34,566 (not including mortgage debt), with credit cards, personal loans and overdrafts being the most common forms of debt.

Factoring in any debts into your life insurance cover means that, if they need to be paid back from your estate after your passing, your loved ones won’t miss out financially.

Source: Money.co.uk
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According to SunLife, the average cost of a funeral in the UK is £3,953 (with the overall cost of dying at £9,200).

Funeral costs have increased by 116% since 2004 and are a significant cost which should be factored into the amount of life insurance you secure.

Source: SunLife.co.uk
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When factoring in cover for your children, you may wish to calculate the amount based on how long it is until they reach financial independence.

This could include childcare (£7,000 per year for part-time care), school expenses (£1,519 per school year for uniforms, lunches, stationary etc), as well as an additional sum for further education (this could be a contribution of up to £5,000 per year).

Sources: Daynurseries.co.uk, Primarytimes.co.uk & Savethestudent.org
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2 in 5 adults say they are relying on an inheritance to fund their retirement.

Factoring in an inheritance to your sum assured could allow loved ones to live a more financially comfortable life. Alternatively, you could leave a cash gift to a charity of your choosing.

Source: Moneyage.co.uk
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If you’re lucky enough to have your own savings or are part of the 30% of UK residents who already have a life insurance policy in place, this can provide financial protection for loved ones.

By entering your current cover, savings or death in service amount you can reduce the sum assured you require.

Source: Scottishbusinessnews.net
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What life insurance do you need for a mortgage?

There are two main types of life insurance that are often taken out to help protect a mortgage:

  • Decreasing term life insurance
  • Level term life insurance

The type of mortgage you have will determine which form of life insurance is most suitable.

Decreasing term life insurance

Also known as mortgage life insurance, decreasing term life insurance is an affordable policy where your sum assured (cover amount) reduces every month throughout the term, in line with the outstanding balance of a repayment mortgage.

If you pass away during the term, the pay out could help to clear the mortgage in full.

  • Helps protect a repayment mortgage
  • Sum assured up to £1,000,000
  • Term length up to 40 years
  • Sum assured reduces every month in line with mortgage
  • Free terminal illness cover included
  • Add critical illness cover for an extra cost
  • Quotes from 20p-a-day through Reassured ¥

Level term life insurance

Level term life insurance is ideal for helping to protect an interest-only mortgage, as the cover amount stays the same (level) throughout the term.

If you pass away during the term, it could help to clear your mortgage in full, as well as help to cover future living costs for your family.

  • Helps protect an interest-only mortgage
  • Sum assured up to £1,000,000
  • Term length up to 40 years
  • Sum assured remains level throughout the term
  • Free terminal illness cover included
  • Add critical illness cover for an extra cost
  • Quotes from 20p-a-day through Reassured †

Whilst decreasing and level term policies are the most popular among new homeowners, you may also consider the following options when looking to protect a mortgage:

Family income benefit

Similar to term life insurance, family income benefit provides you with cover during a set term (typically 2 - 40 years).

If you pass away, it will pay out in monthly, tax-free payments for the remainder of the term, helping to cover monthly mortgage payments and/or family living costs.

Family income benefit is available from just 20p-a-day through Reassured ¤ .

Life insurance with critical illness cover

This is a term life insurance policy with critical illness cover added for an extra cost.

This offers financial protection in the event you’re diagnosed with a critical illness or pass away during the policy term. If you make a claim due to an illness, the pay out could help you to meet mortgage repayments until you’re able to return to work.

Life insurance with critical illness cover is available from just 33p-a-day through Reassured º .

It’s also possible to compare term life insurance quotes online through Reassured. Our buy online service allows you to gather free quotes and apply for your chosen policy online in under just 11 minutes ^ .

Contact Reassured to find out which option could be right for you, and for your free quote comparison.

Joint life insurance for a mortgage

If you’re buying a house as a couple, there’s also the option of taking out level or decreasing term life insurance on a joint basis, which could help you to save money.

Joint life insurance will cover both you and your partner at the same time, paying out only once if either partner passes away during the specified term.

You don’t have to be married to secure a joint policy. It will just help to ensure that the surviving homeowner can afford to repay the mortgage by themselves.

As there is only one potential pay out, and one monthly premium to pay, joint life insurance could be cheaper than having two single policies.

See our joint life insurance guide for more information »

What insurance do you need for a mortgage?

As well as life insurance, other types of insurance you may need for a mortgage include:

  • Buildings insurance
  • Income protection insurance
  • Critical illness cover
  • Contents insurance
  • Mortgage payment protection insurance

Buildings insurance

It’s not a legal requirement, but most lenders will require that you have buildings insurance as a condition of your mortgage.

Buildings insurance will protect you against the cost of repairs or the rebuild of your home if it’s damaged or destroyed (by flood, fire, subsidence or storm).

It covers things such as:

  • Damage to the structure of your home (the roof, floors, walls, windows)
  • Permanent fixtures (such as bathroom suites and fitted kitchens)

Unfortunately, this isn’t something we provide at Reassured.

Income protection insurance

Income protection provides financial security in the event you’re unable to work due to an illness or injury.

It pays out in monthly tax-free payments to help replace your lost income, allowing you to cover your mortgage repayments and other essential costs.

You don’t have to buy income protection when getting a mortgage, but it’s worth considering if you don’t have sufficient savings or sick pay to fall back on.

Nowadays, income protection insurance is more common than MPPI (explained below) for mortgage borrowers and it can be more affordable.

Quotes start from just 20p-a-day through our fee-free broker service ‡ .

Critical illness cover

Critical illness cover provides financial protection if you’re unable to work due to a critical (but non-life threatening) illness.

You’re not required to have critical illness cover when buying a house, but many homeowners could benefit from this type of policy.

A claim can be made if you’re diagnosed with a specified illness, such as:

  • Cancer (advanced cases)
  • Stroke
  • Heart attack

It pays out in a lump sum which could help you to cover financial commitments, such as a mortgage, while you’re recovering.

At Reassured, we can help you to arrange critical illness cover combined with a life insurance policy from just 33p-a-day.

Contents insurance

Contents insurance is a type of policy that’s designed to help protect the things in your home (your belongings).

It includes the cost of repairing or replacing damaged possessions in the event of a fire, flood or theft.

Some contents insurance policies also protect your belongings when you’re not in the home (such as your phone or laptop).

This isn’t something we provide at Reassured.

Mortgage payment protection insurance

Mortgage payment protection insurance (MPPI) is a type of income protection that provides cover in the event you’re unable to work due to unforeseen circumstances, such as:

  • Illness
  • Injury
  • Redundancy

MPPI pays out in monthly payments for up to a year or until you return to paid work, helping to ensure you don’t default on your mortgage.

The payments can cover your mortgage repayments in full, or up to a limit of 65% of your usual gross monthly salary.

This isn’t something we provide at Reassured.

How much does life insurance for a mortgage cost?

Life insurance for a mortgage starts from just 20p-a-day through Reassured.

Monthly premiums are typically calculated based on the following factors:

The cost will also depend on:

  • Policy type (level or decreasing term)
  • How much cover you need (the size of your mortgage)
  • The policy term (the length of your mortgage term)

Calculate your premium each month based on the level of risk you pose (the likelihood of a claim being made on your policy, and the potential pay out amount).

Example monthly premium quotes

In the table below, we have provided example monthly quotes for a decreasing term policy that’s taken out to help protect a £250,000 mortgage over a 30 year term.

All the below quotes are based on an applicant in good health, who’s a non-smoker:

Age AIG logo Aviva Legal & General
20£5.82£5.64£6.04
25£6.09£6.18£6.99
30£7.51£7.55£8.65
35£10.19£10.39£11.58
40£15.83£16.14£17.49
45£24.35£34.39£25.80
50£38.68£56.04£40.56

In the table below, we have provided example monthly premium quotes for a decreasing term policy that’s taken out to help protect a £400,000 mortgage over a 30 year term:

Age AIG logo Aviva Legal & General
20£7.52£7.80£8.14
25£8.24£8.53£9.57
30£10.52£10.80£12.38
35£14.80£16.61£15.44
40£23.83£23.98£25.47
45£37.46£53.25£35.57
50£65.89£89.44£66.48

In the table below, we have provided example monthly premium quote for a level term policy, taken out to help protect a £250,000 mortgage over a 20 year term:

Age AIG logo Aviva Legal & General
20£6.94£5.09£6.41
25£7.17£5.86£7.21
30£8.76£8.54£9.69
35£11.89£11.77£13.85
40£17.25£16.83£20.63
45£25.86£25.86£30.85
50£45.69£41.95£51.68

As you can see in the tables above, the cost of life insurance for a mortgage can vary greatly between different policies and insurers, so it’s always important to compare multiple quotes.

At Reassured, we can help you identify the right policy for you at the right price by comparing quotes from our panel of leading UK insurers.

Get in touch for your free, no-obligation quotes.

How long should I get life insurance for?

Generally, if taking out life insurance to help protect a mortgage, then your policy term should align with your mortgage term.

For example, if you have a mortgage term of 30 years, your life insurance policy term could last for 30 years.

Alternatively, if you have young children, you could take out a policy where the term ends when your children reach a certain age, for example 18 or 21.

This can provide financial protection until your family are less financially dependent on you.

When securing life insurance for a mortgage, it’s also common to have your sum assured mirror your remaining mortgage balance.

What happens to life insurance when a mortgage is paid off?

What happens to your life insurance policy once your mortgage is paid off will depend on your chosen policy term.

If you’ve opted to have your policy term mirror your mortgage term, then your life insurance will expire in line with your mortgage.

This means your monthly premiums will stop and you’ll no longer be covered.

If you’ve chosen a longer term to help protect other aspects of your life, your policy will continue until:

  • You pass away (within the term)
  • You’re diagnosed with a terminal illness (within the term)
  • Your policy term comes to an end

Do I need life insurance if I don’t have a mortgage?

If you don’t have a mortgage, whether you need life insurance or not will very much depend on your own personal circumstances.

Protecting a mortgage isn’t the only reason to take out a life insurance policy.

Life insurance can also help cover many other costs for your loved ones should you pass away suddenly, such as:

  • Funeral expenses
  • Childcare costs
  • Family living costs
  • Rental expenses
  • Outstanding debts

If you have people who depend on you financially, such as a partner and children, you may want to take out a policy to secure their financial future.

Or you may want to take out life insurance to help your loved ones cover your funeral costs (the average cost of a UK funeral is £4,141[2]).

Contact the award-winning team at Reassured for your free, personalised quotes.

How to find the right life insurance when buying a house

When getting a mortgage, your lender or advisor may encourage you to buy life insurance directly through them, usually from a favoured insurer.

This is because they could earn a commission from you doing so.

However, it’s important to be aware that this may not provide you with the most cost-effective option available.

It’s always important to compare life insurance quotes to help you find a good deal.

At Reassured, we can help you do this, free of charge and without obligation.

Our experts are on hand to provide all the information you need to make a fully informed decision and find you our best quotes.

You can also compare mortgage life insurance quotes at your own leisure using our buy online service. This allows you to get instant quotes and apply for your chosen policy online in under just 11 minutes.

Compare Mortgage Life Insurance Quotes »

Life insurance and mortgage protection FAQs

Is it better to have mortgage insurance or life insurance?

It’s difficult to say whether mortgage insurance or life insurance is better than the other, as they can both offer you financial protection in different circumstances.

Mortgage insurance (which could refer to an MPPI or income protection policy) allows you to keep up with mortgage repayments if you’re seriously ill or injured and not able to earn an income.

Life insurance is designed to help your family pay off your mortgage if you were to pass away during the policy term.

Therefore, to have full cover for your mortgage no matter what happens, it could be beneficial to have both forms of cover in place (if your budget allows).

What is the difference between life insurance and mortgage life insurance?

There’s really no difference between life insurance and mortgage life insurance.

Mortgage life insurance is simply a life insurance policy that’s taken out with its purpose being to cover your mortgage should the worst happen.

Usually, this is a decreasing term life insurance policy that’s set up to mirror your mortgage repayment schedule.

Do I still need life insurance if my mortgage is paid off?

If you currently have life insurance in place, and your mortgage has been paid off, your policy could still benefit your loved ones if you pass away.

For example, it could help to cover:

  • Funeral costs
  • Family living costs
  • Retirement funds for a partner
  • Inheritance tax (currently 40% on anything above £325,000)
  • Charity donation

If you’ve paid off your mortgage and your life insurance policy has also ended, you may consider taking out a new policy to help cover other expenses for your family.

Whether that’s level term life insurance, whole of life insurance or an over 50s plan.

Sources:

[1] https://www.finder.com/uk/mortgages/mortgage-statistics#what-is-the-average-length-of-a-mortgage-in-the-uk

[2] https://www.sunlife.co.uk/funeral-costs/

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