08 May 2025
Do you need life insurance for a mortgage?
6 minutes
For many of us, taking out a mortgage to buy a property is our biggest financial commitment. But what happens if you pass away before you've paid it off? How do you protect your family after you're gone? Do you need life insurance for a mortgage?
Here, we explain whether life insurance is a compulsory requirement when getting a mortgage, why you should take it out, and what sort of life insurance you should consider.
Looking for life insurance before you take out a mortgage? Get in touch with us! Our team of life insurance experts will look at your individual circumstances to make sure you get the right level of cover to protect you and your family.
Is life insurance compulsory for a mortgage in the UK?
No. Contrary to popular belief, you don't need a life insurance policy to qualify for a mortgage in the UK.
However, taking out life insurance before you take on the task of repaying a mortgage can be a sensible (and responsible) decision — especially if you have a partner or dependents, ensuring stability for your family's future.
Why should you take out life insurance when getting a mortgage?
If you die without life insurance, your mortgage and other debts will be passed to your loved ones. If they cannot continue paying the mortgage, they might be forced to sell the property and move out — or face the possibility of having the property repossessed by the lender.
Having your life insured means that, in the event of your death, your family could clear the debt and remove the burden of mortgage repayments during an emotional and stressful time.
When to consider life insurance with a mortgage
Below, we look at some of the scenarios where it would be beneficial to have life insurance for a mortgage:
If you're buying a home with your partner
Life insurance is worth considering if you're buying a home with your partner. If your mortgage is based on both incomes, one of you might struggle to cover repayments alone if the other passed away. Mortgage life insurance can keep you covered by providing a lump sum to help pay off the loan, ensuring your partner can stay in the home without financial stress.
If you're a landlord
If you're purchasing a home as an investor or planning to rent out a property you already own, you may still need life insurance. It helps ensure the remaining mortgage is covered if you pass away. If you refinance your investment property or portfolio, increasing your life insurance coverage can safeguard against higher liabilities.
It's important to note that life insurance differs from landlord insurance, which provides protection for the property's structure (buildings insurance) and its contents (contents insurance).
What type of life insurance do you need for a mortgage?
Ultimately, when you take out life insurance with your mortgage in mind, you'll want to ensure that it pays out a lump sum that can be used to pay the remaining mortgage balance in the event of your death.
Mortgage life insurance
Fortunately, there's a type of life insurance designed to do just that. It's called “decreasing life insurance” — otherwise known as “mortgage life insurance”.
It gets its name from the fact that the payout decreases over the policy term, in much the same way that the balance of your mortgage decreases as you make repayments. That means, should you pass away during your mortgage term, your loved ones will have the right amount of money to clear the mortgage balance.
Level term life insurance
Decreasing life insurance is usually cheaper than the other option: “level term insurance”. Level term life insurance doesn't decrease over time. Instead, it pays out the same amount at any point over the period of cover.
You might want to consider level term insurance if you have an interest-only mortgage (where you pay off the interest each month, but the capital remains untouched until the end of your mortgage term). That way, your family will have enough to clear the entire balance.
Critical illness cover
While not a life insurance policy, you might want to consider critical illness cover - it can provide a lump sum if you're diagnosed with a serious illness covered by your policy. This pay-out can help with mortgage repayments if you're unable to work, allowing you and your family to prioritize what matters most—your health and well-being.
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How much cover do you need for a mortgage?
Deciding on the right amount of mortgage life insurance cover depends on several factors: the remaining loan balance, interest rates, mortgage duration, income protection, existing debts, education costs, estate planning, and inflation.
Interest rates play a crucial role. Fixed-rate mortgages maintain a steady interest rate, while variable-rate mortgages fluctuate, impacting the overall repayment amount.
How does life insurance affect mortgage deals?
As we mentioned above, life insurance is not compulsory to get a mortgage in the UK, but it can provide financial support and safeguard mortgage repayments in the future.
That said, mortgage lenders set their own criteria for who qualifies for a mortgage. And in some cases, this can include having life insurance in place.
Why do some mortgage providers recommend having life insurance?
While most lenders primarily assess affordability—your ability to repay a mortgage loan based on your income, expenses, and debt—some may strongly encourage life insurance as part of the approval process, particularly if you are considered a higher credit risk.
If you're buying a property as a couple, when you get a joint mortgage with a partner, your repayments will be calculated based on two salaries instead of one.
If the worst happens, the lender will want to know that you or your partner can keep up with the repayments alone. A life insurance pay-out protects all parties in this situation.
Read more: Buying your first home together – what you need to know.
Note: Always take care when discussing life insurance with a mortgage lender. Chances are they'll want to sell you a life insurance product offered by their bank or a sister organisation. You don't need to take out life insurance with the same lender as your mortgage. You'll often find a cheaper deal if you shop around.
Can a mortgage be declined if I don't have life insurance?
We can't speak for every mortgage lender out there, but it's typically quite unusual to have a mortgage application declined solely because you don't have life insurance.
Of course, that's not to say that it can't happen. Lenders can refuse a mortgage at their own discretion and for any number of reasons.
The lack of life insurance coverage on your part might sway their decision. However, most mortgage lenders will explain why your application has been declined, so you can take steps to avoid another rejection the next time you apply.
What other insurance do I need to get a mortgage?
Most lenders will insist you have buildings insurance in place before they'll approve your mortgage.
Buildings insurance
Buildings insurance protects your property against damage that might require repairs. This type of insurance covers the structural elements of your home, such as the walls, roof, floors, fixtures, and fittings. Buildings insurance isn't the same as Home & Contents insurance, which covers your belongings, such as furniture, TV, and appliances.
Lenders want you to have buildings insurance in place before lending you money to safeguard their investment. For example, they want to know that, if your home was damaged due to a storm or fire, you could make the necessary repairs to maintain the property's value.
What happens if you don't have buildings insurance?
If you didn't have buildings insurance and the property was damaged, the value could be significantly lowered. That means the lender might be unable to sell it and recoup the money they loaned you if you fell behind on your mortgage payments.
Ultimately, that's why buildings insurance is a requirement for a mortgage, whereas life insurance is not.
Read more: Is it a legal requirement to have Home & Contents insurance?
Do I need mortgage life insurance if I have no dependents?
If you don't have any dependents — meaning people who depend on you, your income, and your home, such as a partner or children — you might think there's little point in taking out life insurance.
However, having a life insurance policy can cover more than just your mortgage should the worst happen. It could help your wider family pay for funeral expenses or clear other outstanding debts. This could make dealing with your estate easier.
On the other hand, if you choose not to take out life insurance and you die before the end of your mortgage term without any dependents, your mortgage lender will probably repossess and sell your house to recoup their loan.
Do I need life insurance if I don't have a mortgage?
If you're not currently a homeowner, you might think having life insurance isn't as important. However, if you're renting a property and have people who rely on you financially, it's still worth considering.
Ask yourself, could your loved ones afford the rent and other household bills if you were no longer around?
A life insurance policy can provide peace of mind for renters and homeowners alike.
To recap: Do you need life insurance for a mortgage?
In short, no, you don't need life insurance to get a mortgage in the UK. The only insurance you legally require before getting a mortgage is buildings insurance.
However, taking out life insurance when you apply for a mortgage is a good idea.
Should the worst happen and you die unexpectedly, your loved ones will be financially secure and able to stay in the family home without any mortgage stress or worry, protecting your family's future.
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