As a couple, having a mortgage can be one of the most significant financial commitments you undertake together. As with any shared financial responsibilities, you should consider the unforeseen circumstances that life may throw your way. This is where it could make sense to have joint life insurance in case anything happens to you or your partner or spouse.
In this guide we'll explain:
What joint mortgage life insurance is
The types of cover that can protect a mortgage
The pros and cons of having joint life cover for a mortgage
The cost of buying joint mortgage cover
Where to get advice for buying life cover
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What is joint mortgage life insurance?
Mortgage life insurance is a type of life insurance policy designed to cover a mortgage in the event of the death of one or both partners.
Essentially, if one partner passes away, the policy pays out a lump sum that can be used to help pay off the remaining mortgage balance. This helps ensure that the surviving partner can stay in their home without the financial burden of continuing mortgage payments alone.
As with most types of cover, it can be bought as a joint life insurance policy. With joint cover, the policy pays out either after the first death in the couple or once both you and your spouse have passed away.
One of the main benefits of owning a joint policy is that you only have to pay one set of premiums for two people. Additionally, it could work out cheaper than buying two single policies.
Types of mortgage life insurance?
Several types of mortgage cover can be bought as Joint policy. Two of the main types of cover are whole life insurance and term life insurance. Each has its benefits when it comes to protecting a mortgage.
Whole life insurance
As known as life assurance, whole life insurance covers the policyholder for the remainder of their life. As a joint policy, it guarantees a payout on either the first or second death, whichever you have opted for at the start of the policy.
Whole life insurance tends to be more expensive than other types of cover as the cover is permanent (so long as your premiums are paid).
The payout doesn't have to be used solely for a mortgage. If the balance has been paid off before you die, your family can use the funds to cover other expenses such as living costs or for your funeral.
It is important to understand that due to the lifelong nature of the policy, it is sometimes possible to pay more in premiums than you would receive from a payout. This is why we would suggest talking to an adviser to ensure the plan works for your circumstances.
Level term life insurance
Term life insurance covers you for a set amount (usually between 5-50), making it an ideal option for covering a mortgage. With level term cover your premiums and payout amount remain the same throughout the policy term.
The policy expires once it reaches the end of the term. In most cases, people tend to take out a term that matches the length of their mortgage.
Like with whole life insurance, the payout can be used to cover other costs if the mortgage is repaid beforehand. Premiums are often cheaper than whole cover as the policy can expire.
Decreasing term life insurance
Decreasing term life insurance is specifically designed to align with the balance of a repayment mortgage. As you make regular payments on your mortgage, the amount you owe reduces, and so does the payout from your life insurance policy.
With decreasing term life insurance, the value of the cover reduces over the policy's term, making it generally more affordable than whole life or level term policies. This can be useful for those looking to manage their monthly budget effectively while still having financial protection for their loved ones.
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Joint mortgage life insurance pros and cons
Having joint cover for a mortgage has a number of benefits, as well as drawbacks.
Pros:
More affordable ─ A joint policy is usually cheaper than two separate policies since there is one premium to pay.
Easier to manage ─ One policy means less paperwork and fewer payments to track. No need to juggle multiple policies!
Guaranteed payout ─ If one partner passes away, the policy pays out, so the surviving partner isn’t left struggling with the mortgage.
Peace of mind ─ Knowing your home is protected can reduce financial stress and give you confidence about the future.
Flexible funds ─ The payout doesn’t have to go straight to the mortgage. If it’s already paid off, the money can be used for living expenses or other bills.
Cons:
Limited cover ─ Most types of insurance usually only cover the mortgage, so if your family depends on both incomes, it might not be enough.
One-time payout ─ It only pays out when the first person dies. The surviving partner won’t have cover afterward and may need a new policy — likely at a higher cost.
Shared risk ─ If one person has health issues or risky habits, it could raise the price for both of you.
Possible complications ─ Making a claim can sometimes be trickier than with individual policies, adding stress during an already difficult time.
Less customisation ─ Your policy may not be as flexible as having separate plans tailored to each person's needs.
How much does joint mortgage life insurance cost?
Unlike a normal life insurance policy, your mortgage will affect the amount of cover needed. This, in turn, can affect the cost of your policy as well as factors including:
Your age
General health
Occupation
Lifestyle ─ including smoking
Type of cover chosen
The length of the policy term
In most cases the more cover you take out, the more expensive your premiums will be. If you only wish to cover mortgage repayments you may need less cover than if you intend to provide additional financial support to your family and/or loved ones.
Where to get advice
If you're not sure which type of life insurance is right for you, Cavendish Online can help. Our trained advisers can provide detailed guidance on the various options available to you so that you can choose the policy that best fits your financial situation and personal needs.
Call our team today on 01392 43 61 93 (Monday to Friday, 9am - 5.30pm). If you already know which type of policy you need you can get an online quote. We'll do our best to provide low premiums from leading insurers to help you cover what's most important.
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