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Learn how life insurance works, how much cover you may need, the different types available and what affects the cost. Get expert life insurance advice from Hello Mortgage.
Life insurance can pay a lump sum to your chosen beneficiaries if you die during the policy term, subject to the terms and conditions of the policy. For many homeowners, it's a key part of protecting a mortgage and family from financial pressure including mortgage repayments, household bills and other debts if the worst happens. This guide explains how life insurance works, the main types of cover, what can affect the cost, and how it relates to your mortgage.
Life insurance is a policy that can pay a lump sum on death, subject to the policy's terms and conditions. There are several types of policy, and the right one for you depends on your circumstances — your mortgage type, family situation, health and budget. At Hello Mortgage, a specialist protection adviser can help you compare suitable options.
Life insurance is generally straightforward.
You choose the amount of cover you want and the length of time you want the policy to run. The insurer will usually ask questions about your age, health, lifestyle and circumstances before accepting your application, and you'll typically pay a monthly premium. If you die during the policy term and the claim meets the policy conditions, the insurer pays the agreed amount to your beneficiaries.
For example, £300,000 level cover over 25 years could pay out £300,000 if you died within that term, subject to the policy's terms and conditions.
The right amount of life insurance depends on your mortgage, other debts, income, and what your family would need if that income stopped. A common starting point some advisers use:
Outstanding mortgage + other debts + future family costs − savings and other suitable resources = starting of estimate of cover
This is a rough guide, not a calculation suited to everyone — for example, it doesn't account for inflation, changing family needs, or existing employer cover. A protection adviser can help you work through this in more detail based on your actual circumstances.
Premiums vary from person to person — there's no standard price. Cost is generally influenced by:
- Age
- Health and medical history
- Smoking status
- Amount and length of cover
- Type of policy (level, decreasing or whole of life)
- Occupation and lifestyle
Taking cover out earlier in life can often mean a lower premium, though this isn't guaranteed and depends on individual underwriting. Price shouldn't be the only factor, the cheapest policy may not give your family the most appropriate level of protection.
There are several types of life insurance. The most appropriate option depends on your financial commitments and what you want the policy to achieve.
cover stays the same for the whole term (e.g. £250,000 over 25 years stays at £250,000 throughout, subject to terms). Often considered for interest-only mortgages, where the loan balance doesn't reduce, or where you want to leave a fixed sum.
cover reduces over the term, broadly in line with how a repayment mortgage balance reduces. Often considered specifically to protect a repayment mortgage, and can be cheaper than level cover for the same starting sum assured.
designed to provide cover for your entire life rather than a fixed term, provided premiums are maintained. Typically costs more than term insurance because pay out is effectively guaranteed at some point, rather than contingent on dying within a set period.
Comparing this to Income protection or critical illness cover can help you build a fuller picture of your protection needs.
If you have a mortgage, it's worth thinking about what would happen to it if you died, could your partner or family keep up the repayments from their own income? Life insurance can provide a lump sum that could go towards repaying some or all of the outstanding mortgage, depending on the cover and policy chosen.
- Repayment mortgage: decreasing term cover is often considered, as the sum assured can reduce broadly in step with the mortgage balance.
- Interest-only mortgage: level term cover is often more relevant, since the balance owed doesn't reduce over the term.
The right choice depends on your full circumstances, not just your mortgage type alone.
Life insurance and critical illness cover protect against different events.
Life insurance can pay a benefit if you die during the policy term, subject to the policy conditions.
Critical illness cover can pay a lump sum if you are diagnosed with one of the specific illnesses covered by the policy and meet the relevant definition and conditions.
Some people choose to have both types of protection because they address different financial risks.
For example, life insurance can help protect your family if you die, while critical illness cover could provide financial support if you survive a serious illness but are unable to work or face additional costs.
Some employers provide death-in-service benefit as part of a workplace benefits package. This can be valuable, but it may not fully meet your family's needs, and it's usually tied to your employment, meaning it could be lost or reduced if you change jobs. It's worth reviewing workplace cover alongside any personal policy rather than assuming one replaces the other.
Having a medical condition doesn't automatically rule you out of getting life insurance. Insurers will typically ask about your health and medical history, and depending on your circumstances this can affect the premium, terms, or availability of cover. It's important to answer all health and lifestyle questions accurately, since inaccurate answers can affect a future claim. If you have a more complex health history, a protection adviser can help you understand which insurers may be more suitable.
A life insurance policy can potentially be placed in trust. Doing so can change who controls the pay out and how it's dealt with, and depending on the type of trust and your circumstances, may help proceeds reach beneficiaries outside of probate. the tax treatment (including whether proceeds sit outside your estate for inheritance tax purposes) depends entirely on the trust type, your individual circumstances, and current tax rules, which can change.
Tell us a bit about yourself and what you're looking for. It takes a few minutes, won't affect your credit score, and there's no obligation to proceed.
We'll match you with lenders who consider your circumstances, even with a less-than-perfect credit history, so you know where you stand before applying.
Once you're matched with the right lender, we'll guide you through the application and stay with you right through to completion.
Choosing life insurance isn't simply about finding the cheapest premium. You need to consider the amount of cover, policy term, type of policy, mortgage and wider financial commitments.
At Hello Mortgage, our protection advisers can help you understand your options and find suitable cover based on your circumstances.
1. Tell us about your circumstances
We'll ask about your mortgage, family, income, financial commitments and existing protection.
2. Understand your protection needs
We'll help you consider how much cover you may need and which type of policy could be suitable.
3. Compare suitable options
We'll compare available options based on your circumstances and explain the key differences.
4. Apply for your chosen policy
Once you've decided which option is right for you, we'll guide you through the application process.
5. Review your protection
Your circumstances can change, so it's worth reviewing your protection when you move home, have children, change your mortgage or experience another significant life event.
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Life insurance is about more than protecting a mortgage. It's about making sure the people who depend on you have financial support if the worst happens.
If you're unsure how much cover you need or which type of life insurance could be suitable, speak to Hello Mortgage for a free, no-obligation conversation about your protection needs.
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Life insurance isn't generally a legal requirement for having a mortgage. However, it can be worth considering what would happen to your mortgage if you died and whether your family could continue making the repayments.
The amount you need depends on your financial commitments and who relies on you. Your mortgage, debts, income, savings and future family costs are all factors worth considering.
The cost varies depending on factors such as your age, health, lifestyle, smoking status, the amount of cover and the policy term. There is no standard price that applies to everyone.
Level term life insurance keeps the amount of cover broadly the same throughout the policy term. Decreasing term life insurance reduces the amount of cover over time and is commonly considered for protecting a repayment mortgage.
