PROTECTION GUIDES

Life insurance for a joint mortgage

When two of you share a mortgage, decide whether one joint policy or two separate policies would protect you both best.

CALL 02382 000825 TALK TO US ABOUT YOUR PROTECTION

The short answer

With a joint mortgage you can cover both of you on one joint policy, or take out a separate policy each. A joint policy usually costs a little less, but it pays out once, on the first death, and then ends. Separate policies cost a little more, can pay out twice, and let each of you choose your own amount and term.

The right choice depends on your budget, your incomes and who else relies on each of you.

What a joint mortgage leaves behind

When you buy a home together, you are usually both responsible for the whole mortgage, not just half of it. If one of you died, the lender would still expect the full monthly payment from the person left behind. Many couples set their budget on two incomes, so managing on one could be hard.

Life insurance can pay a lump sum on a death during the policy term, subject to the policy terms, so the surviving partner can clear or reduce the mortgage and stay in the home. The question for joint buyers is how to arrange that cover between you.

Joint policy or two separate policies?

One joint policy

A joint life first death policy covers both of you under a single plan with one premium. It pays out once, when the first of you dies during the term. It is usually a little cheaper than two single policies for the same amount, and it is simple to manage.

Two separate policies

Each of you has your own policy, with your own amount, term and premium. If one of you dies, that policy pays out and the other policy carries on, so the surviving partner is still covered. If both of you died during the terms, both policies could pay.

Separate policies can also be set up differently. One could be decreasing cover to match the mortgage, and the other level cover for extra family support. Our guide to decreasing and level mortgage life insurance explains the difference.

What happens after the first death

Once a joint policy pays out, it ends. The surviving partner has no cover left from it, even if the payout cleared the mortgage and they later take on a new loan or have others depending on them.

Worth knowing

If the survivor wants new life insurance, they would need to apply again, at an older age and possibly in worse health than when you first took out the joint policy. That can make new cover more expensive, or harder to arrange. Separate policies avoid this, because the survivor's own policy continues.

Who each option suits, and when cover may not be needed

Who it can suit

•Joint policy: couples on a tight budget whose main aim is to clear a shared mortgage
•Joint policy: partners with similar incomes and no other dependants with different needs
•Separate policies: couples who want the survivor to keep cover after a claim
•Separate policies: partners with different incomes, or children from other relationships

When it may not be needed

•Either of you could comfortably pay the whole mortgage alone, and nobody else depends on you
•Existing cover you expect to keep, such as a personal policy, already covers the mortgage
•Savings or investments would clear the mortgage without leaving the survivor short

Cover through work, such as death-in-service benefit, usually stops when you leave that employer, so it is worth deciding whether you want protection that stays with you.

Choosing amounts, terms and a budget

The mortgage balance and remaining term are the starting point. Beyond that, each of you may need something different:

•Different incomes: if one of you earns much more, the other may need more cover to manage without that income.
•Children from other relationships: each partner may want money to go to their own children, which is easier to arrange with separate policies.
•Different ages or health: each person is priced on their own details, so the cost of separate policies can differ between you.
•Affordability: a joint policy keeps the premium down, while separate policies cost a little more for greater flexibility.

If one of you has a medical condition, it can affect the price of a joint policy for both of you. With separate policies, only that person's premium is affected. We can look at life insurance with pre-existing conditions in more detail if that applies.

Next steps

Start by agreeing what you want the cover to do: clear the mortgage only, or also support the survivor and any children. Then compare a joint policy with separate policies for the same needs. We can set these out for you, with the differences in cover as well as price.

Life cover does not pay if one of you is seriously ill or unable to work. If that would put the mortgage at risk, look at paying your mortgage if you cannot work as well.

A recent case

Real examples of cover we have recently arranged. Customer details are anonymised.

Life insurance · Family protection

Protecting a mortgage and a growing family

The situation

A married couple with two children came to us after taking out a repayment mortgage. They wanted to protect their home and their family's finances within a monthly budget they were comfortable with.

What we recommended

•£300,000 of joint decreasing life cover over 30 years, designed to reduce broadly in line with their repayment mortgage.
•For family protection on top of the mortgage, we compared one joint policy paying £200,000 on the first death with separate policies paying £200,000 for each parent. The separate policies cost only £1.50 a month more in total.

The outcome

Each parent now has their own family life cover alongside the mortgage policy, and the overall cost stayed below their budget.

The family policies include an annual option to increase cover without further medical underwriting, subject to the policy terms.

Taking up an increase raises the premium as well as the cover.

Every case is different. The cover, terms and premiums available to you depend on your circumstances and each insurer's underwriting.

Talk to us about cover for your joint mortgage

Tell us about your mortgage, your incomes and anyone else who depends on either of you. We will set out joint and separate options side by side and recommend what fits. There is no fee for our advice.

CALL 02382 000825 TALK TO US ABOUT YOUR PROTECTION GET A LIFE INSURANCE QUOTE

How CoverLife can help

CoverLife Insurance gives personalised protection advice, with a dedicated adviser for your application and ongoing support. We have access to a panel of 15 protection insurers, with availability varying by product and circumstances, and we compare benefits and terms alongside price. We also help with policy reviews and with applications involving medical conditions, unusual occupations or hazardous hobbies.

We charge no advice or arrangement fee; we receive commission from the insurer. CoverLife Insurance is a trading name of CoverTrade Risk Management Ltd, authorised and regulated by the Financial Conduct Authority, firm reference number 1020148. More about CoverLife

Related guides

The questions people usually ask next.

← All protection guides: what do you want to protect?

Common questions

Does a joint life insurance policy pay out twice?+

No. A joint life policy, often called joint life first death, pays once, when the first of the two people insured dies during the term. The policy then ends, and the surviving partner has no cover left under it. Two separate single policies can each pay out, so both deaths during their terms could lead to two claims.

What happens to our joint policy if we separate?+

A joint policy cannot usually be split into two single policies, although some insurers offer an option to do this in limited circumstances, set out in the policy terms. Otherwise you may need to keep it going, agree who pays, or cancel it and each apply for new cover at your ages and health at the time. With separate policies, each of you keeps your own cover.

Is a joint policy always cheaper than two single policies?+

A joint policy for the same amount and term is usually cheaper than two single policies, because it pays out only once. The difference is often modest. We can show you both options side by side so you can weigh the saving against the extra protection separate policies give.

Can we have different amounts of cover on a joint policy?+

Not usually. A joint policy has one sum assured that applies whichever of you dies first. If you want different amounts, for example because one of you earns more or has children from a previous relationship, separate policies are normally the way to do it.

We are not married. Can we still take out joint cover?+

Yes. Insurers generally offer joint policies to couples and to other people who share a financial commitment, such as a mortgage. What matters is that each of you would be affected financially by the other's death. We can also explain how naming who receives the payout, including using a trust, works for unmarried couples.