Frequently Asked Questions About Mortgage Protection Insurance

Mortgage protection insurance is a type of life insurance that’s designed to pay off your mortgage if you die during the term of the policy. The level of cover decreases over time similar to your decreasing outstanding mortgage amount.  It helps provide security for your family by paying off the mortgage keeping your family in your home.

Most lenders require mortgage protection insurance as a condition of giving you a home loan. It reassures them that the mortgage will be cleared if you pass away, so your family won’t be left with the debt.

• Mortgage protection is a type of life insurance. It’s designed to cover the balance of your mortgage if you pass away. The amount of cover reduces over time, just like your mortgage does.
• Life Assurance (or level‑term policy) works differently. The cover stays the same for the whole policy term. If you pass away, it pays a fixed lump sum that your family can use for anything they need - not just the mortgage.

Single Life Cover: Protects one person only. If that person passes away, the policy pays out once.

Joint Life Cover: Protects two people, but the policy will only pay out once, usually when the first person dies. After that, the cover ends.

Dual Life Cover: Protects two people and can pay out twice - once on each person’s death. This means both lives are fully covered.

• Your age: Generally, the younger you are, the lower the cost.
• Whether you smoke: Smokers pay more because insurers see it as a higher health risk.
• Your mortgage amount and how long it runs for: A bigger mortgage or a longer term usually means higher premiums.
• Any extra benefits you choose: Adding optional features - like Serious Illness Cover or a Conversion option - will increase the price.

After you submit your application, the insurer may also look at things like:

• Your health and medical history
• Your lifestyle (e.g., hobbies that may carry extra risk)
• Your job, if it’s considered higher risk

Specified Illness Cover (sometimes called Serious Illness or Critical Illness Cover) is insurance that pays you a lump sum if you’re diagnosed with one of the serious illnesses the policy covers. These are typically major, life‑threatening conditions.

The payout can help with things like medical costs, taking time off work, or supporting your family while you recover.

Yes - you may still be able to get mortgage protection insurance even if you have a pre‑existing medical condition. However, your health and lifestyle can affect the price of your policy and the type of cover an insurer can offer.

When you apply, your insurer reviews your application through a process called underwriting. After this review, a few different outcomes are possible. The insurer may decide to:

• Accept at the normal price (standard rates): Your application is approved with no extra cost.
• Accept with a higher price (non-standard rates): You’re offered cover, but it costs more than a standard policy because of the additional risk.
• Accepted with exclusions: You get cover, but certain medical conditions won’t be included (this usually applies to Specified Illness or Income Protection policies).
• Postponed: The insurer delays their decision - often because they need more information, such as pending test results or an upcoming medical appointment.
• Declined: The insurer is unable to offer cover based on the information provided.

Your mortgage protection insurance should match the size and length of your mortgage. Lenders normally require your policy has enough to clear whatever is left on your mortgage if you pass away.  The cover should last for the full mortgage term.

So, in most cases, the right amount of cover is the same as your outstanding mortgage balance, for the same number of years as your mortgage.

Interest rates on your mortgage and your mortgage protection insurance don’t always move together, and that’s okay. Your mortgage protection insurance is designed so that its cover reduces at a steady rate. As long as the interest rate on your mortgage is lower than the one used in your mortgage protection policy, your policy will always have enough cover to clear your mortgage, if you pass away.

If you change anything about your mortgage - like the interest rate, the term, or the amount you owe - it’s a good idea to review your mortgage protection insurance too. That way, you can make sure it still gives you the right level of protection.

If you pay off your mortgage or switch to a new lender, it’s important to review your mortgage protection insurance. Your policy may no longer match your needs, and you have a few options:

• Use your existing policy with your new lender - Many lenders will accept your current mortgage protection policy if the cover is still suitable.
• Update your existing policy - If your insurer allows it, you can change the policy details, so it matches your new mortgage amount or term.
• Take out a new policy - You might choose to replace your existing cover with a new plan that better fits your new mortgage arrangement.
• Cancel the policy - If your mortgage is fully cleared and you no longer want or need the cover; you can cancel it.

If you remortgage your home, it’s important to check that your mortgage protection insurance matches your new mortgage.  Your loan amount or term may change, and your current policy might no longer be the right fit. You generally have three options:

• Keep your existing policy - If the cover amount and term line up with your new mortgage, you can usually continue using the same policy.
• Update your existing policy - Some insurers allow you to adjust your policy to match your new mortgage details.
• Take out a new policy - If your existing policy doesn’t meet your new requirements, you can replace it with one that does.

Yes - you can cancel your mortgage protection policy at any time.  Before you do, it’s important to think about what it would mean to have no cover in place. 

if you cancel now and later decide you want a new policy, it may cost you more.  This is because premiums increase as you get older.  Also, they may increase even more, if your health or lifestyle has changed since you first took out your policy.

No - mortgage protection insurance does not cover loss of income. You will need an ‘Income Protection’ policy for that type of protection.

Income Protection can be taken out at any time and is designed to replace part of your income if you can’t work due to illness or injury. It doesn’t provide cover for losing your job. It provides a regular monthly payment, giving you financial stability while you’re unable to work. You can even choose a level of cover that matches your monthly mortgage repayment, helping to protect your family home if you’re out of work long‑term.

Payments from Mortgage Protection insurance doesn’t usually create tax issues for your beneficiaries. The payout normally goes straight to your lender to clear the mortgage, so your family typically doesn’t face any tax on it. However, every situation is different, so it’s always a good idea to speak with a tax advisor for personalised guidance.