Mortgage Protection Insurance

Mortgage protection insurance exists for one specific job: making sure your mortgage can be cleared if you die during the term, rather than leaving that debt for whoever inherits the property. This calculator estimates the cost of cover matched to your mortgage, comparing the two main structures — decreasing and level term — so you can see clearly which one actually fits your situation and what the cost difference genuinely is.

Why Decreasing Term Costs Roughly Half of Level Term

Decreasing term cover, which reduces over time to roughly track a repayment mortgage’s falling balance, typically costs around 45% less than level term cover for the same starting sum insured — a genuinely substantial saving, not a marginal one. This reflects a straightforward actuarial reality: the insurer’s maximum possible payout falls every year alongside the mortgage balance, so the average risk exposure across the whole policy is considerably lower than a level policy that pays the full original amount regardless of when death occurs within the term. For a standard repayment mortgage, where the actual need genuinely shrinks the same way the cover does, this makes decreasing term the more cost-efficient match in the vast majority of cases.

This is worth understanding clearly before assuming level term is simply the safer, more thorough option — for a straightforward repayment mortgage specifically, decreasing term genuinely provides the same practical protection at a considerably lower cost, since the cover need was never going to stay level in the first place.

Seeing the Discount in Real Pounds

A £220,000 mortgage over 25 years for a 35-year-old non-smoker costs roughly £12.10 a month on level term cover, or around £6.66 a month on decreasing term instead — a saving of around £65 a year, or roughly £1,630 across the full 25-year term. That gap grows considerably larger on bigger mortgages, making the choice between the two structures a genuinely meaningful decision, not a minor detail.

The One Mortgage Type Where Decreasing Term Is the Wrong Choice

This is a genuinely important distinction easy to miss: decreasing term cover is designed to mirror a repayment mortgage’s falling balance, but an interest-only mortgage does not fall the same way — the full capital remains outstanding throughout the term, only being repaid at the very end from a separate repayment vehicle or the property sale. Using decreasing term cover against an interest-only mortgage leaves a growing, not shrinking, gap between what the policy would pay out and what is genuinely still owed. Level term cover, which pays the same fixed amount throughout, is the correct match for an interest-only mortgage specifically, since the actual need does not decrease the way it does on a repayment mortgage.

Part-and-part mortgages, combining a repayment portion with an interest-only portion, need a more careful match still — potentially a blend of both cover types, or a level policy sized to cover the genuinely non-reducing interest-only portion specifically, rather than defaulting to whichever type feels simpler without checking the actual structure of the mortgage itself.

What Happens If You Overpay Your Mortgage Faster Than the Policy Assumes

Decreasing term cover is calculated against a standard, unmodified repayment schedule at the outset — it does not automatically adjust if you subsequently overpay your mortgage faster than originally planned. This means overpaying can leave you with cover that exceeds your actual remaining mortgage balance, which is not dangerous, simply less cost-efficient than it could be. If you are planning meaningful overpayments, our Mortgage Overpayment Calculator is worth running first, since it is worth periodically reviewing whether your mortgage protection cover level still genuinely matches your faster-shrinking balance, rather than assuming the original schedule remains accurate throughout the term.

Matching the Term to the Mortgage, Not a Round Number

The policy term should match your actual mortgage term, not an arbitrary round number chosen separately — cover that runs out before the mortgage is repaid leaves a genuine gap for the final years, while cover that runs considerably longer than the mortgage simply costs more than necessary for years when the original need no longer exists. This mismatch is more common than it might seem, since a mortgage protection policy taken out at the same time as the original mortgage does not automatically update if the mortgage term is later extended or shortened through a separate remortgage decision. If your mortgage term changes, through remortgaging to a different term length or through significant overpayments shortening it, it is worth reviewing whether the protection term still lines up. Our Life Insurance Calculator is useful for working out broader life cover needs beyond the mortgage specifically, such as income replacement or funding dependants’ education, which mortgage protection alone is not designed to address.

Frequently Asked Questions

Important Information

This calculator provides an estimate for general information purposes only and does not constitute insurance or financial advice. Actual premiums depend on full underwriting by the insurer. For advice specific to your circumstances, consult a qualified financial adviser. See our Disclaimer for further information.