A life insurance policy will payout a lump sum of money if the person covered dies before the policy ends. 

The policy term will be the number of years you need the life cover for. So this could be until your mortgage ends, until your children are a certain age (eg 21) or until your retirement age. You choose the length of the policy.

The amount of cover is again decided by you. This could be your outstanding mortgage and debts, enough money so your children can finish education or sufficient money for your partner to live on.

For term assurance policies, which are the most common, the premiums are generally fixed throughout the full term of the policy, so you always know how much it will cost.

When someone dies their debts and mortgage don’t just disappear. They are usually paid off from the deceased’s estate which will include savings, investments, insurance and property.

If there are not enough liquid assets (cash, savings, investments) then it is common to have to sell the house to pay off the mortgage.

If the remaining mortgage holder chooses to carry on with the mortgage then they will need to ‘apply’ to the lender. With proof of income etc in the normal way. Of course there are no guarantees that this will be successful.

Even though a mortgage borrower has died the mortgage lender still needs to receive their monthly payments. This will make what is already a very emotional time more upsetting and stressful.

Unless there are funds available a decision needs to be made about how to keep the property and whether this is even possible.

If a mortgage life insurance policy is in place then this will pay out the insurance value (sum assured) on death. This will enable the family to reduce or pay off the mortgage completely.

When you take out a policy the insurance amount can either remain level or it will decrease each year, roughly in line with a repayment mortgage.

The cost of life cover depends on many things. Such as

• your age
• current health
• family history
• amount of cover needed

As we all get older each year, generally the cheapest time to buy life assurance is now.

Insurers offer policies that start from around £10 per month. 

In short no.

If you have a partner and possibly children or dependants then you can arrange life cover now to help them after your death, regardless of whether a mortgage is currently in place.

There are mortgage specific policies available to protect an existing mortgage.

Yes you can and this is often a very sensible option.

You will then be able to separate out your protection needs into different policies which can all have different levels of cover and terms.

• A policy that just provides cover for your mortgage and other debts
• A policy that provides an income on death to get your children through their education
• A policy that provides either a lump sum or income on death for your partner

Yes you can. This may be helpful if you have a joint mortgage.

Yes, life insurance can be used to protect a mortgage on your home or business mortgages and loans.

Whilst there’s no extra cost for covering a business loan, the life cover does need to be set up correctly for it to be effective.