Most people applying for a mortgage are only interested in deposits, interest charges, and lender conditions. But one of the more common questions is: Do you need life insurance to get a mortgage? The response is no, life insurance is not a legal requirement, but there’s a bit more to it than that. In this article, we’ll summarize when life insurance is needed, why it may be advised, and how it can safeguard you and your family.
Is Life Insurance Necessary for a Mortgage in the UK?
No, life insurance isn’t necessarily required to be approved for a mortgage in the UK. That said, some lenders or mortgage brokers may highly suggest it, particularly if:
- You are taking out a joint mortgage
- You have dependents who rely on your income
- You’re taking out a larger mortgage for a longer term
True, nonetheless, a lender cannot deny your mortgage just because you’re not having life insurance in place, other than when it’s a stipulation of a specific type of mortgage product (which is rare).
Why Life Insurance Is Usually Advised
While not required to get the mortgage approved, life insurance is generally a good option to protect your home and loved ones. Here is why:
- Peace of Mind
If you were to die suddenly, a life insurance policy can be used to pay off outstanding mortgage, preventing your spouse, partner, or family from financial distress or losing the property.
- Required for Some Types of Mortgages
If you’re borrowing to buy a Help to Buy, shared ownership, or some high-LTV (loan-to-value) mortgages, some lenders will require further protection as part of their risk assessment for affordability.
- Family Protection
If you have dependants, children, or a joint owner-occupier who would be unable to meet the repayments themselves, life insurance compensates in the event of the worst occurring.
Types of Life Insurance for Mortgage Protection
There are different types of life insurance, depending on your needs:
Decreasing Term Insurance
- Designed to keep up with your mortgage balance
- The pay-out amount decreases over time, based on your repayment mortgage
- Often the lowest cost to protect your mortgage
Level Term Insurance
- Pays an agreed lump sum on death during the term
- Does not decrease over time
- Useful if you need extra protection in addition to the mortgage
Joint Life Insurance
- Covers two people (couples)
- Pays out only once, typically every death
- Appropriate for joint mortgage owners
Whole of Life Insurance
- More costly, but pays out whenever you die
- Less commonly used solely for mortgages
Do You Need Life Insurance if You’re Single or Have No Dependents?
If you’re single with no dependants and buying a property in your sole name, life insurance may not be necessary. However, consider:
- Whether someone else would inherit the debt (e.g., parents who helped with a deposit)
- If you’d prefer your house to be left mortgage-free
- It’s still worth discussing with a financial adviser.
Is Life Insurance Sold by Mortgage Brokers?
Yes. Most mortgage brokers, such as ourselves, Oportfolio, are closely aligned with life insurance companies or have access to independent protection advisers. This allows clients to receive tailored advice on cheap cover that is compatible with the conditions of their mortgage.
Should You Get Life Insurance?
While not a requirement, life insurance is a sensible and often essential part of financial planning for homeowners. It provides peace of mind that your loved ones won’t be burdened by mortgage debt if something happens to you.
You don’t necessarily need it to get a mortgage, but you should consider it to get what matters most. Need Help with Choosing the Best Cover? At Oportfolio, we’re not just here to help you get the best mortgage, we’re here to help you cover your home and family, too. Contact one of our mortgage and protection advisers today for a free, no-obligation review of mortgage protection and life insurance.
