There are two types of insurance to consider depending on the type of mortgage you have:
- Level term insurance
- Decreasing term insurance
Level term insurance explained
Level term insurance may be suitable if you have an interest-only mortgage as the sum assured remains the same throughout the term of the policy. This means no matter when you die during the policy term you will receive the same pay out. As the sum assured stays the same, it will be reduced by the effects of inflation.
Decreasing term insurance explained
With decreasing term insurance, the sum assured will reduce broadly in line with what you owe on your mortgage. Monthly premiums remain the same throughout the term of the policy and will be lower than level term premiums.
This will mean that your dependants may be able to pay off the mortgage and won't have to worry about being forced to leave the family home.
Choosing between single and joint life insurance
You may also want to consider who is covered by the policy: