How Does Life Cover Insurance Work?

Life cover insurance guarantees that, in case you pass away, your mortgage will be repaid and your family will be able to continue living in your house. Put simply, life cover pays a death benefit to your beneficiaries, if you pass away within the set term, which usually matches the length of your mortgage. However, if you survive the term, your dependants are not entitled to the death benefit.

To be provided with life cover insurance, you need to pay a fixed monthly premium to your insurance company, which, in return, is committed to pay a specified death benefit to your beneficiaries in the event you pass away within the term of the policy. The death benefit allows your family to anticipate the sudden loss of income and cover their living expenses adequately.

Types of life cover insurance

Life cover insurance can take two forms: as mortgage protection – also known as the decreasing term insurance policy and as life insurance – also known as the level term insurance policy.

The decreasing term insurance is a type of mortgage life cover suitable for homeowners who struggle with a repayment mortgage. As the years go by, the loan balance gets lower and the total amount of your insurance decreases as much as your mortgage. At this point, it may be a good option to purchase mortgage life cover. As time passes by, your mortgage amount decreases and, therefore, if you pass away, your dependants will have to pay less money on the remaining mortgage.

Level term insurance is a type of life cover that provides consistent coverage during a certain period of time, usually 1 to 30 years, at a fixed face value. Level term insurance has a fixed rate during the coverage period and does not build any cash value. The only possibility for the rate to be increased is if the probability of the policyholders’ sudden death rises.

How to select life cover insurance

Before selecting life cover insurance, you need to take into account several factors:
• What does life cover insurance include?
• Is life cover insurance beneficial to me and my family?
• How much will the death benefit be if I pass away?
• What is the fixed monthly premium for my case?
• What happens if I miss out on a payment?

Once you have answered all above questions, then you need to proceed with a second round of factors that address the insurer’s credibility:
• How renowned are they?
• Who underwrites them?
• Are they reliable enough to be around in the next twenty or thirty years to actually pay out the death benefit to my family?

Before choosing your insurer, make sure to shop around and approach at least five different insurance companies to get the greater picture of the different life insurance plans and options available to you, and then compare each plan using the above questions.

Why you need to insure your mortgage

The main reason why you need to purchase a life cover for your mortgage is because you need to protect the current level of your debt. This means that, as your mortgage decreases, so does your insurance and it will reach a point that your mortgage won’t be protected anymore. In the event of a sudden loss of income, your family will be unprotected. Therefore, it makes financial sense to purchase life cover for your mortgage so that you offer an extra protection to your family in case something happens to you, but also to have a level of coverage that you can afford paying while alive.

Your family is the most important capital to protect and your goal is to prepare them to deal with any financial emergency. The best you can do is start making all the necessary provisions today so that, in case you are not suddenly around, they are able to continue their mortgage payments and live in your house.

The background of a finance journalist who writes about the insurance services has helped Terry McBrearty compile particularly useful and factual overviews of the plans and products provided by big companies like Aegon . Read more of his articles and overviews on . is owned by Mediamash (NI) Limited, who are an Introducer Appointed Representative of Seopa Ltd. The quote system is owned and operated by Seopa Ltd, who are authorised and regulated by the FCA, number 313860. You can view our registration at We do not give financial advice on this website. If in doubt get professional advice and always read the policy information before purchasing an insurance contract.