Mortgage Life Insurance Policies and Level Term Life Insurance Policies

Article published on 16th April 2007

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The two main types of life insurance policies available in the UK today are mortgage life insurance and Level Term Life Insurance. Typically mortgage life insurance policies decrease in value over the term of the policy which makes them ideal for covering capital and repayment mortgages. The alternative is a level term life insurance plan where the sum assured remains the same throughout the term of the policy, this makes it an ideal policy for covering interest only mortgages or for general family protection; obviously this type of policy is more expensive that than mortgage life insurance.

To summarise:

Mortgage Life InsuranceLevel Term Life Insurance
Cost Cheaper than level cover More expensive than decreasing cover
Value of Sum Assured The sum assured (payout) decreases over the term of the policy, usually at a in-line with current mortgage rates. The sum assured of the policy stays level over the which means it pay out exactly the same in the last year as it would do in the first year.
Best Use Mortgage life insurance typically should only be used to cover repayment mortgages or loans as the amount of cover decreases over the policy term which could potentially leave a shortfall if taken out to cover interest only mortgages. Level Cover can be used for most forms of protection, for example to cover an interest only mortgage where the liability remains constant for a number of years. Alternatively it can be used for a repayment mortgage where any surplus cover could be left to your family to aid them financially. Finally the policy doesn't have to cover a mortgage, it could be used solely for a funeral benefit or to leave a sum of money to your family in the event of your death.

You can take out mortgage life insurance or Level Term Life Insurance on a single or joint life basis. You can choose the amount of cover that your require and the term that you require policy to run for. All life insurance policies taken out through Top Quote Online include terminal illness benefit free of charge and can have critical illness benefit added if required on for a higher premium. By including critical illness, the policy would pay out upon death or upon diagnosis of a specified critical illness.

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