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Home » Services » Protection Services » Mortgage Protection » Types of Mortgage Protection

Types of Mortgage Protection

Ciarán Power

Last Updated: February 2nd, 2024 at 6:43 pm

Table Of Contents


Mortgage protection is an essential form of financial security for homeowners. It ensures that your mortgage repayments are covered in unforeseen circumstances, such as illness, injury, or death. This page provides an overview of mortgage protection, its various types, and its importance in safeguarding your home and family’s future.

Types of Protection

Life Insurance

This type of policy is designed to pay off your remaining mortgage balance if you die during the policy term. It provides the assurance that your family or dependants will not have to bear the financial burden of the mortgage in your absence. Depending on your age, you can get basic life insurance for as little as £4 a month.

Critical Illness Cover

If you are diagnosed with one of the specific critical illnesses covered by your policy, this cover can be used to pay off your mortgage or cover the monthly payments. It’s particularly useful in cases where illness impacts your ability to earn an income. This is usually a little more expensive than basic life insurance, however its importance cannot be ignored.

Income Protection

This cover provides you with a regular income if an illness or injury prevents you from working. It helps you keep up with your mortgage payments and other living expenses during your recovery period. Only around 6% of the UK have this insurance – however we believe it is an essential part of your financial health especially if you are a homeowner.

Family Income Benefit

Rather than a lump sum, this type of insurance provides a regular, tax-free income to your dependents in the event of your death during the policy term. This steady income stream can be used to cover ongoing living expenses, including mortgage payments, ensuring your family’s financial stability. For families, this added benefit gives you extra peace of mind and ensures they can live comfortably in your home, even if the mortgage is paid off.

Which Term is Right for Me?

Choosing the right type of life insurance term depends on your personal and financial circumstances.

  • Level Term Life Insurance: This is suitable if you seek coverage for a specific period, like the duration of your mortgage or until your children are financially independent. It keeps the payout amount the same no matter if you claim in year 1 or year 20.
  • Whole Life Insurance: Ideal if you want lifelong coverage and a guaranteed payout upon death, regardless of when that occurs. It’s more expensive but can be part of your estate planning, ensuring a legacy for your heirs.
  • Decreasing Term Insurance: Often aligned with a mortgage, the payout decreases over time. This is cost-effective if you primarily want to cover a decreasing debt, like a repayment mortgage.
  • Increasing Term Insurance: The payout increases over time, usually to keep pace with inflation. This might suit you if you want to maintain the policy’s real value over a long period.

How Much Should I Budget?

Budgeting for life insurance depends on the policy type, coverage amount, term, your age, health, lifestyle, and other risk factors. Term life insurance is generally more affordable than whole life insurance. Premiums for decreasing term insurance typically cost less than those for increasing term insurance. As a rule of thumb, consider covering your mortgage as a priority, then assess what additional cover you or your family may need in the event of a payout.

When Should I Get Life Insurance?

The best time to get life insurance is typically when you have dependents or significant financial obligations, like a mortgage. However, buying a policy when you’re younger can be more cost-effective since premiums tend to increase with age and potential health issues. It’s also wise to reassess your life insurance needs at key life stages, such as marriage, parenthood, or significant changes in your financial situation. We would say, in general, that if you don’t have any cover, the best time to get life insurance cover is today.


Mortgage protection is a key aspect of financial planning for homeowners. It provides critical coverage to ensure that your family can maintain their home and lifestyle in the event of your death or inability to work. Choosing the right type and amount of coverage is crucial, and consulting with a financial advisor can help tailor a plan to your specific needs.

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