Do you need life insurance for a mortgage?

No. You don't have to take out life insurance by law when you get a mortgage.

Some lenders say so themselves. Halifax and Lloyds Bank both say you don't need their cover to get a mortgage with them.

Other lenders may make life insurance a condition of lending you the money. Even if yours doesn't, you might want cover so your dependants have enough money to keep your home if you pass away.

Our guide to mortgage life insurance explains how the cover itself works.

No. If the FCA's mortgage rules cover your lender, it can't insist that you buy the policy it sells.

Those rules ban a mortgage lender or broker from tying, except in some specified cases. Tying means selling a mortgage only as a package with other financial products, so you can't get the mortgage on its own.

A lender can still require you to hold an insurance policy related to the mortgage. If it does, it must accept a policy from another supplier, as long as that policy gives an equivalent level of guarantee.

Offered cover with your mortgage? Most mortgage providers offer life insurance automatically, but you might find a better deal elsewhere.

Who provides your lender's life insurance

Here's who provides the life insurance some well-known lenders sell:

Buying through your lender can mean you only see one insurer's policy. Barclays, for example, only offers mortgage protection from Legal & General, which pays Barclays a percentage of the premium as commission.

Nationwide, Santander and TSB say the insurer pays them commission when you buy through them, and NatWest is paid commission or referral fees. NatWest and Santander say this is included in your premium.

A life insurance broker can compare more than one insurer. Our broker partner, Reassured, compares life insurance quotes from a panel of leading insurers.

A broker will call to go through quotes with you.

Already bought a policy through your lender? You have 30 days from buying it to change your mind and get a full refund, without penalty and without giving a reason.

• Mortgage life insurance: how cover for a mortgage works
• Life insurance brokers: what a broker does
• Life insurance vs mortgage insurance: the differences explained

So your dependants have enough money to keep your home if you pass away.

The mortgage doesn't go away when you die. It's normally one of the first debts paid out of your estate (the property, money and possessions you leave), or from insurance taken out with the mortgage.

If someone inherits a home with a mortgage on it, the lender will either want the mortgage repaid immediately or ask them to take it over.

If your partner passes away, you can't simply transfer the mortgage into your own name, even on a joint mortgage. A joint debt can still be recovered from the surviving borrower.

Legal & General says a payout can also help your loved ones keep up with monthly bills and childcare costs.

When cover makes sense, and when it may not

MoneyHelper says life insurance usually makes sense for couples or parents. It suits you if you have dependants such as school-age children, or a partner who relies on your income. It also suits you if you want your loved ones to be able to cover your funeral costs.

MoneyHelper says it wouldn't suit someone with no dependants. You might also decide against it if you're single, your partner earns enough for your family to live on, or you're on a low income and could qualify for benefits.

Check what cover you already have through work too. Employee packages often include death in service benefit, cover linked to your salary. It stops if you leave that employer.

Decreasing cover is designed for a repayment mortgage. For an interest-only mortgage, Barclays and Santander both describe level cover (the payout stays the same) as suitable.

Both are term insurance: cover for a fixed period (the term), such as 5, 10 or 25 years, that pays a lump sum if you die within it.

Most mortgages offered now are repayment mortgages. Very few interest-only mortgages are offered, usually only in special circumstances such as buy-to-let or borrowing in later life.

Decreasing cover suits a falling debt and is usually cheaper than level term.

Level cover can work with a repayment mortgage too. Barclays says its level cover, underwritten by Legal & General, is designed for both interest-only and repayment mortgages.

Say you take out a 25-year repayment mortgage and die 15 years in. A decreasing policy would pay roughly what's left on the loan. A level policy pays the full original amount, so there's money left after the mortgage is cleared.

How much cover to choose

Want to cover more than the mortgage? The amount depends on your mortgage or rent and other debts, and on how many dependants you have. Your take-home pay and day-to-day living costs count too.

If covering everything costs more than you can afford, decide what matters most or choose a lower level of cover. Some protection might still be better than none.

• Decreasing term life insurance: cover that falls with a repayment mortgage
• Level term life insurance: a payout that stays the same
• Level term or decreasing?: the two compared
• Mortgage life insurance calculator: see how your balance falls

No. A couple with a joint mortgage can take out one joint policy together or two single policies.

A joint policy ends after the first death, so the surviving partner would need a new policy to stay covered.

Legal & General has a replacement cover option that could let the surviving partner take out a new single policy. You'd need to ask within 6 months of a valid claim being paid. On decreasing cover, the new policy covers the amount left on the original one when the claim was paid.

Its decreasing cover can also be split into two single policies. That applies if you divorce, end a civil partnership, move a joint mortgage into one name or take out a new mortgage in one name. You'd ask within 6 months of that being finalised, and L&G says the change could affect your premiums.

How you own the home matters too. In England and Wales, when you buy together you choose to own it as joint tenants or tenants in common, and tell HM Land Registry.

As joint tenants, the home automatically goes to the other owner if one of you dies. As tenants in common, your share doesn't automatically go to them.

Unmarried couples and putting a policy in trust

Buying together without being married or in a civil partnership? In England, an unmarried partner doesn't inherit under the intestacy rules (the rules that apply when there's no will). Without a trust, your partner also has no legal claim on your life insurance.

Putting a policy in trust means the payout goes straight to the people you've chosen, without waiting for probate (the legal right to deal with someone's estate). The policy isn't counted as part of your estate, so it can be paid outside Inheritance Tax too.

• Joint life insurance: how a joint policy works
• Joint or single life insurance?: which suits a couple
• Life insurance in trust: how a trust speeds up a payout

Mortgage payment protection insurance, income protection and critical illness cover can help with your mortgage while you're alive.

Life insurance pays out when you die, or earlier if your policy has terminal illness benefit and your life expectancy is under 12 months. It doesn't pay if illness or disability stops you earning.

The names are easy to mix up. Mortgage payment protection insurance (often called accident, sickness and unemployment cover) isn't the same as a mortgage protection life policy, which pays off the loan when you die.

Critical illness cover isn't mortgage payment protection insurance either. It's often combined with life insurance. Combined in one policy, it pays out on the first event: diagnosis of a covered illness or death.

• Mortgage payment protection insurance: cover for monthly repayments
• Critical illness cover: a lump sum on diagnosis

Check the cover you already have, match the amount, term and interest rate to your mortgage, and find out when the new policy starts.

1. Check the cover you already hold You can hold more than one life policy; there's no legal limit. If a lender covered by the FCA's mortgage rules requires cover, it must accept a policy from another supplier with an equivalent level of guarantee. Death in service cover stops if you leave that employer.
2. Match the cover amount and term to your loan With decreasing cover on a repayment mortgage, Legal & General says the cover amount should match your outstanding mortgage. It also suggests checking that the policy lasts for your full mortgage term.
3. Compare the policy's interest rate with your mortgage rate Legal & General and Nationwide both ask decreasing-cover customers to check that the policy's interest rate is equal to or higher than their mortgage rate.
4. Check whether you're covered between exchange and completion When you're moving home, Legal & General's level and decreasing policies include Free Life Cover between exchange and completion (in Scotland, from completion of missives) for up to 90 days. It pays the lower of your proposed cover or your mortgage, up to £300,000, and ends once your policy starts. You must be accepted on standard terms and be under 55 (both of you, on a joint policy). It doesn't apply if another policy already covers the same mortgage.
5. Review your cover if you remortgage or switch At Legal & General, the policy is separate from the mortgage, so it still pays a valid claim if you've paid the loan off. It may not clear a new mortgage unless you adjust the cover to match. If you switch policies, keep the old one until the new one is set up and you've made the first monthly payment.