Having a good life insurance policy in place to protect your property in event of your death is vital. When you die, your family will have enough to worry about without added stress of how they are going to hold on to family home. Your life insurance policy will ensure that this problem is eliminated, with mortgage balance being paid in full upon your death.

The main types of mortgage life cover

The type of mortgage life insurance cover that you require will depend upon what type of mortgage you have, a repayment or an interest only mortgage. There are two main types of mortgage life insurance cover, which are:

* Decreasing Term Insurance * Level Term Insurance

Decreasing term insurance

This type of mortgage life insurance is designed for those with a repayment mortgage. With a repayment mortgage, balance of loan decreases over term of mortgage. Therefore, sum of cover with a decreasing term insurance policy will also go down in line with mortgage balance. So, amount for which your life is insured should match balance outstanding on your mortgage, which means that if you die your policy will hold sufficient funds to pay off remainder of mortgage and alleviate any additional worry to your family.

With decreasing term insurance, cover is usually taken out over term of mortgage, and payment is made should you die during term of policy. Once policy has expired, it becomes null and void, so you will receive nothing at end of your policy if you are still living. There is no surrender value on this type of cover, but it does provide a cost effective means of protecting your home and family during life of your mortgage.

Level term insurance

This type of mortgage life insurance cover is for those that have a repayment mortgage, where principle balance remains same throughout term of mortgage and repayments made by property owner cover interest payments on mortgage only.

Level Term Life Insurance

Level term life insurance is most popular type of life insurance policy with UK consumers, and this may be because it is also cheapest form of insurance. With level term insurance, you and your family can enjoy peace of mind at an affordable price. If you die during term of this insurance policy, your family will receive a lump sum payment, which can help to cover a number of costs as well as provide some degree of financial security at what will inevitably be a difficult time. The money could assist with costs such as:

* Mortgage repayments * Funeral costs * Education costs for children * Day-to-day living

One of reasons that level term life insurance is a fair bit cheaper than other life insurance is because insurer only has to make a payment if insured party passes away, and even then insured party has to die during term of policy for next of kin (or named beneficiary) to be eligible for a payout. One of great things about levels term insurance is that you can benefit from cover for just a few pounds each week, and because payments remain same throughout term of policy, you’ll never have to worry about rising payments.

The reason why a level term insurance policy is so called is because repayment remain level throughout term of policy, so you will never have to worry about cost of your policy rising. The policy is also taken over a fixed term, which is where ‘term’ part of policy comes in. This means that you can enjoy easy budgeting and low cost repayments, and you’ll know exactly how long you will be making payment for. On downside, once policy expires you will not be able to reclaim any money and policy will be cancelled, so you will then need to look at taking out alternative life insurance cover.

The average term of a level term life insurance policy – unless otherwise specified – is fifteen years. There are a variety of factors that contribute to cost of policy such as whether you go for most basic package or whether you include a bolt-on such as critical illness cover, whether you are a smoker, your general health, and term over which you take policy out.

Whole Life Insurance