Life Insurance When You Remortgage

A remortgage is a financial review that most people treat as an administrative task.

Rates get compared carefully, the term sometimes gets extended, and money is occasionally released for an extension or to consolidate debt. The protection arranged alongside the original mortgage usually gets no attention at all, because it is still quietly leaving the account every month.

That policy was sized for a different balance and termed against a different end date, and whether it still fits is worth ten minutes.

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The short answer

Most people remortgage every few years and almost nobody revisits the protection they arranged with the original loan. The cover is usually still sized to a mortgage balance from years ago, on a term that ends at the wrong time, and sometimes it is better than anything available now. A remortgage is the natural prompt to check all three rather than to buy something new.

What this changes

The balance is different, usually lower, sometimes higher if you have borrowed more
The term may have been extended, which pushes the end date past where your cover stops
You may have released equity, which increases the debt your household carries
Your household has probably changed since the original policy: children, income, a partner
Any decreasing term cover is falling on a schedule set against the old loan rather than the new one
Your health may have changed, which affects what you could buy now compared with what you hold

The bit people miss

The expensive mistake is cancelling an old policy and replacing it with a new one because the new one looks cheaper per pound of cover. The old policy was underwritten on your health years ago. If anything has appeared in your medical records since, the replacement may exclude it, and the old policy cannot be got back once it is cancelled. Always have the new cover in force before cancelling the old, and check what the old one actually says first.

Never Cancel The Old One First

This is the one rule worth taking away from this page, and it is broken constantly.

An existing policy was underwritten on your health at the time you took it out, and it stays on those terms regardless of what has happened since. If you have developed a condition, put on weight, started taking medication or simply got older, a replacement policy will be assessed on the person you are now. It may cost more, exclude something, or not be available at all.

So the order matters: compare, apply, get the new cover accepted and in force, and only then cancel anything. A gap of even a few weeks between the two is a few weeks with nothing, and a cancelled policy cannot be reinstated.

Extending The Term Moves The Finish Line

Plenty of remortgages extend the term to reduce the monthly payment, and the protection almost never follows.

If cover was arranged to run for twenty-five years and the mortgage is now running for thirty, there are five years at the end where the loan exists and the cover does not. Those are also the years in which you will be oldest, and therefore the years in which a claim is most likely and replacement cover most expensive.

The same applies in reverse to decreasing term cover, which falls on a schedule matched to the original loan. If you have borrowed more, the policy is now falling faster than the debt it was supposed to track.

What usually fits, and why

Review what you already hold

Start here rather than with a purchase. An older policy underwritten when you were healthier can be worth considerably more than its premium suggests.

Life cover

Top up rather than replace, if the balance or the term has grown. A second smaller policy alongside the original often beats cancelling and starting again.

Income protection

If the term has been extended you will be paying this mortgage at an older age, which makes being unable to work later in life a bigger exposure than it was.

Common questions

Should I change my life insurance when I remortgage?+

Check it rather than change it by default. The policy was sized to a different balance and termed to a different end date, and your household has probably changed too. Sometimes the answer is to top up with a second policy; sometimes the existing cover is better than anything available now because it was underwritten when you were younger and healthier.

Can I just cancel the old policy and get a cheaper one?+

Not before the new one is in force, and often not at all. The old policy was underwritten on your health when you took it out and stays on those terms. A replacement is assessed on your health now, so it may cost more, exclude something or be unavailable. Always have the new cover accepted and running before cancelling anything.

I extended my mortgage term. Does my cover still fit?+

Probably not at the far end. If cover runs for twenty-five years and the mortgage now runs for thirty, there are five years where the debt exists and the protection does not, and those are the years when you are oldest and a claim is most likely. Extending the cover, or adding a second policy for the extra period, is usually the fix.

I released equity. What does that change?+

You owe more, so the cover that tracked the old balance is now short. If you hold decreasing term cover it is falling on a schedule matched to the original loan, which means it is now reducing faster than the debt it was meant to follow. Topping up with an additional policy is normally simpler and cheaper than replacing the original.

Is a remortgage a good time to look at income protection?+

It is a sensible one, particularly if you have extended the term. A longer mortgage means you will still be paying it at an older age, which makes being unable to work later in life a bigger exposure than it was when you first borrowed. It is also a moment when you are already looking at the numbers.

Cover that often goes with this

The gaps we most often find sitting next to this one.