Life insurance
Mortgage life insurance: matching the cover to the balance
Enter the loan, the rate and the years left. The calculator shows what would still be owed at any point, which is what the cover has to clear.
Independent site, not an insurer, broker or government service: benefit claims are made only on GOV.UK.
Mortgage balance and decreasing cover
Example, not your result yet· change a figure to see yours
Still owed
£145,317
| Monthly repayment | £1,112 |
| Level cover of the full loan pays | £200,000 |
| Left over after clearing the loan | £54,683 |
Capital repayment mortgage. Interest-only loans do not fall, so decreasing cover does not fit them.
Mortgage life insurance is term cover set up to repay a home loan if a borrower dies before it is paid off. Most is sold as decreasing term cover, whose sum assured falls each year roughly in line with a capital repayment mortgage. On a £200,000 loan at 4.5% over 25 years, the balance is still £145,317 after ten years and £59,629 after twenty, because early payments go mostly on interest. A decreasing policy follows that curve, so the insurer’s exposure shrinks and the premium is lower than for level cover of the full loan. For a man of 35, the ONS life tables put the chance of a claim within those 25 years at 8.0%. Lenders often ask for cover but cannot insist that you buy theirs: any insurer’s policy that clears the balance does the job.
Rates read and sums checked by Radif Partners · Editorial policy · How the figures are worked out
How a repayment mortgage falls
The monthly payment on this loan is £1,112. At the start, most of it is interest; by the end, almost all of it is capital. So the balance falls slowly for the first decade and fast in the last one. A policy of the full loan bought as level cover pays far more than the debt in the later years, which is money for the family rather than the lender.
| Point in the term | Still owed | Share of the loan | Level cover above the debt |
|---|---|---|---|
| Year 0 | £200,000 | 100% | £0 |
| Year 5 | £175,716 | 88% | £24,284 |
| Year 10 | £145,317 | 73% | £54,683 |
| Year 15 | £107,264 | 54% | £92,736 |
| Year 20 | £59,629 | 30% | £140,371 |
| Year 25 | £0 | 0.00% | £200,000 |
When the rate moves
A decreasing policy’s sum follows a schedule fixed when it starts. Mortgage rates do not stay fixed for 25 years. If the rate rises to 6.0% for the whole term, the same loan still owes £139,350 after twelve years instead of £131,113: the cover can fall faster than the debt. People who expect to remortgage several times sometimes choose a decreasing schedule built on a higher assumed rate, or level cover for part of the loan, so that the policy never falls below the balance.
Interest-only and part-and-part loans
An interest-only loan owes the full amount until the last day, so decreasing cover does not fit it at all. A part-and-part mortgage needs level cover for the interest-only part and can use decreasing cover for the repayment part. The calculator above models the repayment part only.
Cover that already exists
Before buying a mortgage policy, add up what would already be paid on a death: death in service from an employer, an older policy, and savings. If those cover the balance, a new policy only adds a second payout. The life cover calculator counts them, together with the family’s income need, which a mortgage policy alone does not touch.
Trust or estate
A policy that pays the lender directly clears the debt; one paid to the estate is part of it, as GOV.UK’s guide to valuing an estate shows, and waits for probate. Writing the policy in trust, under the rules GOV.UK sets out for trusts, lets the trustees use the money at once. The trust page shows the tax at stake.
The odds that this cover is ever claimed are low, as the ONS life tables show for every age. The cost of being without it, for a family that could not keep the home, is what makes it worth looking at.