Mortgage Protection and Insurance for Homeowners

This guide explains the main types of protection that are worth considering when you take out or remortgage a property in the UK. Protection is not a legal requirement for most mortgages, but a serious illness, loss of income or death without cover in place could put your home and your family’s financial security at risk. Understanding what each type of cover does and when it applies will help you make an informed decision about what protection, if any, is appropriate for your circumstances.

Think carefully before securing your debts against your home.
Your home may be repossessed if you do not keep up repayments on your mortgage.

For a free initial consultation about protection alongside your mortgage, call 01202 155992 or contact Mortgage One.

Life Insurance for Mortgage Holders

Life insurance pays out a lump sum or regular payments to your beneficiaries if you die during the policy term. For mortgage holders, life insurance is the most fundamental form of protection because it ensures the mortgage can be repaid if you are no longer alive. Without it, your family may be unable to keep up the repayments and could face the prospect of selling the property.

There are two main types of term life insurance relevant to mortgages:

Decreasing term life insurance. The sum assured reduces over time, broadly in line with the outstanding balance of a repayment mortgage. Because the payout decreases as the mortgage balance falls, premiums are lower than level term cover. Decreasing term is the most common choice for protecting a standard repayment mortgage.

Level term life insurance. The sum assured stays the same throughout the policy term. Level term is typically used to protect an interest-only mortgage, where the balance does not reduce, or where you want the payout to cover more than just the mortgage, such as living costs for your family. Mortgage One’s interest-only mortgages guide explains why level term is often more appropriate for interest-only borrowers.

The cost of life insurance depends on your age, health, smoking status, the amount of cover and the policy term. According to industry data, the average cost of decreasing term life insurance in the UK was approximately £16.58 per month based on a sum assured of £150,000. For younger non-smokers in good health, premiums can start from under £10 per month.

Writing a life insurance policy into trust is advisable in most cases. A policy held in trust is not counted as part of your estate for inheritance tax purposes and can be paid to your beneficiaries without waiting for probate. Mortgage One can explain how trusts work in practice, but you should seek independent legal advice if your estate planning is complex.

Critical Illness Cover

Critical illness cover pays out a tax-free lump sum if you are diagnosed with a specified serious illness during the policy term. The list of covered conditions varies by insurer but typically includes cancer, heart attack, stroke, multiple sclerosis and major organ transplant, among others. Modern policies can cover 50 or more defined conditions.

A critical illness payout can be used to repay the mortgage, cover lost income during treatment, fund private medical care or make adaptations to your home. It is separate from life insurance and pays out while you are alive. Some borrowers choose a combined life and critical illness policy, which pays out on death or diagnosis of a covered condition, whichever happens first.

Critical illness cover is more expensive than life insurance alone because the probability of claiming during the policy term is higher. The cost depends on the same factors as life insurance plus the specific conditions covered and any optional extras. Premiums increase with age, so arranging cover when you first take out the mortgage is typically more cost-effective than adding it later.

To discuss which types of protection may be appropriate for your circumstances, call 01202 155992 or contact Mortgage One.

Income Protection

Income protection insurance replaces a proportion of your income, typically up to 60 to 70 per cent, if you are unable to work due to illness or injury. Unlike critical illness cover, which pays a single lump sum, income protection provides a regular monthly payment that continues until you return to work, reach the end of the policy term or retire.

This type of cover is particularly important for self-employed borrowers, contractors and anyone without a generous employer sick pay scheme. Statutory Sick Pay in the UK provides a maximum of £123.25 per week from April 2026, which is unlikely to cover a typical mortgage payment, let alone other household costs.

Income protection policies have a waiting period, known as the deferred period, before payments begin. Common options are 4 weeks, 8 weeks, 13 weeks or 26 weeks. A longer deferred period reduces the premium but means you need savings or other resources to cover the gap. The deferred period should reflect any employer sick pay you receive and your level of savings.

Buildings Insurance

Buildings insurance covers the cost of repairing or rebuilding your property if it is damaged by events such as fire, flood, subsidence or storm. Unlike the protection products above, buildings insurance is typically a condition of your mortgage. Most lenders require you to have buildings insurance in place from the point of completion and to maintain it throughout the mortgage term.

Buildings insurance covers the structure of the property, including walls, roof, floors, windows, doors, fitted kitchens and bathrooms. It does not cover the contents of the property, which requires a separate contents insurance policy. If you own a leasehold flat, the freeholder or management company usually arranges the buildings insurance for the block, and the cost is included in your service charge.

Mortgage One does not arrange buildings or contents insurance, but your lender will require evidence of buildings cover before completing the mortgage. Mortgage One’s mortgage application guide explains the documentation and steps involved in the application process, including when buildings insurance needs to be in place.

Reviewing Your Protection When You Remortgage

Remortgaging is a good point to review your protection arrangements. If your mortgage balance, term, income or family circumstances have changed since you last arranged cover, your existing policies may no longer match your needs. Common triggers for a review include:

•       Moving to a larger mortgage or a longer term, which may require higher cover amounts.

•       Switching from repayment to interest-only or vice versa, which may change whether decreasing or level term cover is more appropriate.

•       Changes in family circumstances such as having children, which may increase the amount of cover needed.

•       Changes in employment status, particularly moving to self-employment, where income protection becomes more important.

Mortgage One’s remortgaging guide explains the remortgage process and timing. Protection can typically be reviewed and updated at the same time as the mortgage switch.

How Mortgage One Can Help

Mortgage One can advise on protection products alongside your mortgage application. As part of the Quilter Financial Planning network, Mortgage One has access to protection products from multiple providers and can recommend cover that may be appropriate for your circumstances, budget and existing arrangements.

This includes assessing what level of life insurance, critical illness cover or income protection may be suitable based on your mortgage balance, income, family situation and any existing cover you already have. As a whole of market mortgage broker, Mortgage One can coordinate the mortgage and protection process together, so both are arranged as part of a single advice journey.

Protection products vary in cost, terms, exclusions and claims definitions. What is appropriate depends on your individual circumstances. Mortgage One can explain the options and help you understand how each type of cover would work in practice, but the decision on what to arrange is always yours.

For expert guidance on protection alongside your mortgage, call 01202 155992 or contact Mortgage One.

The information provided in this article is for general guidance only and does not constitute personal or regulated financial advice. If you’d like to understand what these moves could mean for you, speak to Mortgage One. We can explain your options and timings based on your specific circumstances.

Some Buy to Let mortgages are not regulated by the Financial Conduct Authority.

FAQs

1. Is life insurance a legal requirement when taking out a mortgage?

No. Life insurance is not a legal requirement for most mortgages. However, it is strongly recommended because without it, your family may be unable to repay the mortgage if you die during the term. Some lenders may require life cover as a condition of certain products, but this is uncommon.

2. What is the difference between decreasing term and level term life insurance?

Decreasing term cover reduces over time, broadly in line with a repayment mortgage balance. Level term cover stays the same throughout the policy term. Decreasing term is usually cheaper because the insurer’s potential payout reduces each year. Level term is typically used for interest-only mortgages or where you want the payout to cover more than just the mortgage.

3. What does critical illness cover pay for?

Critical illness cover pays a tax-free lump sum if you are diagnosed with a specified serious illness during the policy term. You can use the payout for any purpose, including repaying the mortgage, replacing lost income or funding treatment. The list of covered conditions varies by insurer.

4. How much does income protection cost?

The cost depends on your age, health, occupation, the amount of cover, the deferred period and the policy term. A longer deferred period reduces the premium. Income protection is generally more expensive than life insurance because the probability of claiming is higher, but it provides ongoing monthly payments rather than a one-off lump sum.

5. What is a deferred period on an income protection policy?

The deferred period is the waiting time between becoming unable to work and the policy starting to pay out. Common options are 4, 8, 13 or 26 weeks. A longer deferred period means lower premiums but requires you to have savings or employer sick pay to cover the gap.

6. Is buildings insurance required for a mortgage?

Yes, in most cases. Almost all mortgage lenders require you to have buildings insurance in place from the point of completion. If you own a leasehold flat, the buildings insurance is usually arranged by the freeholder or management company.

7. Should I review my protection when I remortgage?

Yes. Remortgaging is a good time to check whether your existing cover still matches your mortgage balance, term, income and family circumstances. If any of these have changed, your protection may need updating.

8. Can Mortgage One arrange protection products?

Yes. Mortgage One can advise on life insurance, critical illness cover and income protection alongside your mortgage application. As part of the Quilter Financial Planning network, Mortgage One has access to protection products from multiple providers.