What is mortgage protection insurance?
Mortgage protection insurance is a specific type of life insurance designed to pay off your outstanding mortgage if you die. It typically takes the form of decreasing term life insurance — the payout reduces over time in line with your reducing mortgage balance. Some mortgage protection policies also cover critical illness or accident and sickness.
What is life insurance?
Life insurance is a broader term covering any policy that pays out on death. It includes level term (fixed payout), decreasing term (reducing payout, often used for mortgages), whole of life, and family income benefit. Life insurance doesn't have to be linked to a mortgage — it can replace income, pay off any debts, or leave a legacy.
Key differences
- Purpose: Mortgage protection is specifically to repay your mortgage. Life insurance is more flexible — the payout can be used for anything.
- Payout type: Mortgage protection typically decreases with your mortgage. Life insurance can be level (fixed) or decreasing.
- What it covers: Life insurance payout goes to beneficiaries for any purpose. Mortgage protection is designed to pay the lender (though it doesn't have to).
Do I need mortgage protection or life insurance?
If your primary goal is to ensure your mortgage is repaid on death, a decreasing term life insurance policy achieves this. If you want broader protection — to replace income, provide for dependants beyond the mortgage, or leave a flexible sum — level term life insurance (or both) is the better choice.
Can I have both?
Yes — many people have a decreasing term policy to cover their mortgage and a separate level term policy for income replacement. Both run simultaneously and pay out independently on death.
Frequently Asked Questions
Mortgage protection is a type of life insurance — specifically designed to repay your mortgage on death. Standard decreasing term life insurance does exactly the same job without the specific branding.
If your existing life insurance covers enough to repay your mortgage, you may not need additional mortgage protection. Review your cover level to check whether your sum assured would clear the outstanding mortgage balance.