Mortgage protection insurance ensures your mortgage payments are covered if you lose your income due to illness, injury, or death.
Types of Mortgage Protection
| Type | What It Covers | Payout |
|---|---|---|
| Mortgage life insurance (decreasing term) | Death during the term | Lump sum decreasing with mortgage |
| Accident, sickness, and unemployment (ASU) | Unable to work | Monthly payments for 12-24 months |
| Income protection | Illness or injury | Monthly until recovery or term end |
Mortgage Life Insurance
| Feature | Details |
|---|---|
| Type | Decreasing term life insurance |
| Payout | Reduces as your mortgage balance reduces |
| Cost | Low (£5-15 per month) |
| Trigger | Death |
| Best for | Ensuring mortgage is paid off if you die |
The payout matches your outstanding mortgage — if you die, the mortgage is cleared.
Accident, Sickness, and Unemployment Cover (ASU)
| Feature | Details |
|---|---|
| Payout | Monthly mortgage payments |
| Deferred period | 30-90 days |
| Maximum payout period | 12-24 months |
| Trigger | Redundancy, accident, or illness |
| Cost | Moderate (£15-30 per month) |
ASU covers short-term interruptions. It’s not designed for long-term illness.
Income Protection for Mortgage
| Feature | Details |
|---|---|
| Payout | Monthly (typically 50-70% of income) |
| Deferred period | 1-12 months |
| Maximum payout period | Until retirement or fixed term |
| Trigger | Any illness or injury preventing work |
| Cost | Low to moderate |
| Best for | Long-term protection |
Income protection is more comprehensive than ASU but costs more.
Key Differences
| Factor | Mortgage Life | ASU | Income Protection |
|---|---|---|---|
| Covers death | Yes | No | No |
| Covers illness | No | Yes | Yes |
| Covers redundancy | No | Yes | No |
| Duration of cover | Until mortgage ends | 12-24 months | Long-term |
| Payment use | Must pay mortgage | Must pay mortgage | Any purpose |
Do You Need It?
| Situation | Recommended Cover |
|---|---|
| Mortgage with dependent | Mortgage life insurance |
| No savings, no sick pay | ASU or income protection |
| 6+ months emergency fund | None needed for ASU |
| Generous sick pay from employer | None needed for short-term |
| Self-employed with mortgage | Income protection essential |
Cost Comparison
| Cover Type | Monthly Cost (Example) |
|---|---|
| Mortgage life (£150K decreasing) | £8-12 |
| ASU (£1,000/month for 12 months) | £20-35 |
| Income protection (£1,500/month to 68) | £20-40 |
Bottom Line
Mortgage protection insurance ensures your home is secure if you lose income. Mortgage life insurance is essential if you have dependents. ASU covers short-term gaps (especially for self-employed). Income protection provides the most comprehensive cover. If you have 6+ months of emergency savings, you may not need ASU. Review your cover as your mortgage balance decreases.
What to remember about mortgage protection
The core question is straightforward: if you could not work tomorrow, could you keep paying your mortgage? If the answer is no, you need some form of mortgage protection. Mortgage life insurance is the simplest layer — at £5-12 per month for a typical £150,000 decreasing term policy, it ensures your home is cleared if you die during the mortgage term. Accident, sickness, and unemployment (ASU) cover fills the gap for short-term income loss, paying monthly for 12-24 months while you recover or find new work. Income protection is the most comprehensive option, paying 50-70% of your income monthly until recovery or retirement, and is considered essential for self-employed borrowers who have no employer sick pay to fall back on.
The distinction between these three types matters. Mortgage life insurance only pays on death and only clears the mortgage balance. ASU covers redundancy, accident, and illness but is capped at 12-24 months — it is not designed for long-term illness. Income protection covers any illness or injury that prevents you from working and can run until retirement age, but it costs more. Your choice depends on your savings, your employer’s sick pay provision, and whether you are employed or self-employed. If you have six months or more of emergency savings and generous employer sick pay, you may not need ASU at all, though income protection still provides valuable long-term security.
Choosing mortgage protection
Start by assessing what you already have. If you have a partner whose income could cover the mortgage, you may need less cover. If you are the sole earner with dependents, mortgage life insurance is non-negotiable. Check your employer’s sick pay policy — many offer three to six months at full or half pay, which may be enough to cover the deferred period on income protection but not enough for long-term illness. Self-employed individuals typically have no sick pay at all, making income protection the priority.
Compare the three cover types on cost and duration. Mortgage life insurance for £150,000 decreasing typically costs £8-12 per month. ASU cover providing £1,000 per month for 12 months runs about £20-35 per month. Income protection providing £1,500 per month until age 68 costs roughly £20-40 per month — surprisingly similar in price to ASU but far longer in duration. The deferred period matters too: a longer deferred period (3-6 months versus 30 days) lowers the premium because you areself-insuring the first few months. Match the deferred period to your sick pay and savings so you are not left without income during the gap.
Errors that leave your mortgage unprotected
The most common mistake is assuming your employer’s sick pay or the state will cover your mortgage. Employer sick pay typically ends after three to six months, and state benefits are rarely enough to cover mortgage payments. A second error is buying mortgage life insurance and believing it covers illness or redundancy — it does not. Mortgage life insurance pays only on death. If you are alive but unable to work, you need ASU or income protection. A third mistake is letting cover lapse when you remortgage. If you switch lenders and cancel the old policy without arranging a new one, you may find yourself unprotected and uninsurable if your health has changed in the meantime.
Self-employed borrowers are particularly at risk. Without employer sick pay, even a short illness can create immediate financial pressure. Income protection is widely considered essential for self-employed individuals with a mortgage, yet many delay buying it until they have a health scare, by which point premiums are higher or cover may be declined. Finally, reviewing your cover as your mortgage balance decreases is important — a decreasing term life insurance policy matches this naturally, but a level term policy may provide more cover than you need in later years, at a cost that no longer justifies the benefit.
Keeping your cover up to date
Mortgage protection is not a set-and-forget product. Review it at every remortgage, when your income changes, when you take on additional debt, or when your family situation shifts — a new dependent, a partner stopping work, or a move to self-employment all change the risk equation. If your mortgage balance has dropped significantly, check whether your life insurance cover is still proportionate. If your income has risen, income protection payouts based on an older, lower income may no longer be adequate.
The insurance market changes too. New providers enter the market, policy terms evolve, and what was competitive three years ago may no longer be the best deal. Compare quotes at every renewal, but be mindful that switching income protection policies triggers new underwriting and potential exclusions for conditions that have arisen since you bought the original policy. Mortgage life insurance is simpler to switch because it typically has fewer health-related underwriting requirements. Whatever changes you make, ensure there is no gap in cover — the weeks between cancelling an old policy and activating a new one are the weeks you are most vulnerable.