Mortgage protection insurance is a type of term life insurance. If you've heard of decreasing life cover, you've probably heard of mortgage protection insurance – it's another name for the same product. 

Usually, over time, your mortgage goes down. If you have a smaller mortgage, you need less cover – so mortgage protection cover also decreases over time. That's why it's also known as decreasing life cover. 

How does mortgage protection insurance work?

The purpose of mortgage protection insurance is to protect the asset you have a loan on – your home. So, if you were to pass away before you finished paying off your mortgage and during the policy term, your loved ones would be able to continue living in the home, because the insurance would help pay off the rest of the loan 1

With this sort of policy, you pay the same premiums for the policy term, and the amount on your policy gradually reduces until it reaches £0 once the policy expires – and decreases in line with your mortgage (or other repayment loan). A benefit of decreasing cover, as opposed to level or increasing cover, is that the cover of your policy is enough to repay the loan, and the premium is usually lower than for other types of cover. The cover will end if premiums aren't paid, the cover amount is only paid out once and there is no cash in value at any time.

Although people may think of decreasing cover as mortgage protection insurance or mortgage life insurance because the benefit is often used to pay off a mortgage, your loved ones can use the money for other living expenses. 

Do I need mortgage protection insurance?

If you have a mortgage, it's a good idea to have some type of life insurance in place. What type of life insurance is right for you depends on your circumstances. Take time to consider how much your loved ones might need to cover mortgage repayments if you were to pass away.

A study from Aviva reveals that just 58% of mortgage holders have life insurance. Even fewer have critical illness cover (28%) or Income Protection Insurance (12%), which provide financial support if you are diagnosed with an illness that's covered by the policy, or if you're unable to work 2. Many people believe they can't afford life insurance, but it's possible to get life insurance from just £5 a month, which is less than the cost of two take away coffees.

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Visit our Life Insurance page to see full details of the cover we offer.

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