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9 Factors That Affect the Cost of Your Mortgage Life Insurance (and One That Doesn’t)

Posted 16 December 2019

If you have a mortgage, life insurance will give you the peace of mind that you’re covered should the worst happen. Here’s what affects the cost of cover...

Your mortgage is likely to be your biggest financial commitment. So, if you have borrowed tens or even hundreds of thousands of pounds, it makes sense to protect that debt in case the worst happens.

Mortgage life insurance:

  • Ensures a lump sum is available if you die within the policy term
  • Provides your family with the peace of mind that they can repay some/all of the mortgage
  • Ensures your dependents can remain in the family home after your death.

We have previously looked at how mortgage life insurance works, and the various different types of cover that are available.

While cover can start from as little as £8 or £10 a month, the amount you end up paying depends on nine main factors. Keep reading to find out more about what affects your mortgage life insurance premiums…and what doesn’t.

1. Your age

Your age is the most important factor when it comes to determining how much you will pay.

Generally speaking, the younger you are when you take out your insurance, the lower the premium will be. This is because younger people are statistically less likely to die, and so you’re less likely to make a claim on the policy.

2. How much cover you want

The cost of your insurance will be linked to the amount of cover you require. Again, you’ll typically pay higher premiums for a higher level of cover.

The amount of cover you need will generally depend on:

  • The size of your mortgage
  • How many dependents you have
  • Your level of debt

For example, if you have three young children and a large mortgage, you will require enough protection in order to cover these expenses.

3. Your health

When you take out any life insurance, you will generally have to complete an underwriting questionnaire which asks you about your medical and health history. You’ll also have to provide details of your height and weight.

If you have experienced medical problems in the past – perhaps a heart attack or a stroke – or you currently suffer from a medical condition, you might be considered an additional risk and so your premiums may be higher.

Life-threatening conditions such as type-1 diabetes could increase the price of your cover significantly. And, if you have previously suffered from cancer, most insurers won't offer you protection until you've been in remission for a fixed period.

Read: Life and Critical Illness Cover and why they are important for homebuyers

4. Whether you smoke

Smoking increases your risk of developing a range of health issues, from high blood pressure to a heart attack.

Statistically, smokers die younger than non-smokers and so you can expect to pay more for your life insurance if you smoke. Indeed, it is common for smokers to pay as much as twice as much as non-smokers for comparable coverage.

Note that the definition of ‘smoker’ will typically include the use of nicotine replacement products such as e-cigarettes, patches and gum.

5. The term of the cover

For fixed-term policies such as mortgage life insurance (term assurance), the longer the policy term, the higher the monthly premium.

From an insurer’s point of view, the longer you are covered, the more likely the insurer will have to issue a payout.

6. What you do in your spare time

If you enjoy motor racing or mountain climbing in your spare time, it’s likely that you’ll pay more for your insurance.

If you engage in high-risk activities, you’ll statistically increase your chances of dying and so your insurance will be more expensive.

7. Your family medical history

When completing your application form for cover you will typically also have to declare any hereditary illnesses, such as the cause of death for your parents or other family members.

The presence of any such illnesses, such as heart disease or certain cancers, is taken into account due to the increased risk of you contracting the disease.

As a result, your monthly life insurance premium is likely to be higher.

8. Your occupation

Insurers deem certain occupations more high-risk than others. If you work in a dangerous environment, you’re likely to have to pay more for your mortgage life insurance.

Such occupations include:

  • Members of the Armed Forces
  • Police officers
  • Offshore workers (such as oil or gas workers)
  • Pilots
  • Fishermen
  • Firefighters
  • Prison officers.

9. Your choice of premium type

When it comes to mortgage life insurance, you will sometimes have the choice of two different types of premium:

Guaranteed premiums – once your policy is accepted, your premiums are guaranteed not to increase during the policy term

Reviewable premiums – your insurer will review your policy at fixed intervals and, as a result, your premium may change (most likely increase)

Although reviewable premiums normally work out cheaper in the short term, they can be more expensive over the long term as they are likely to increase at regular intervals throughout the duration of your policy.

…and one that doesn’t

Statistically, women live longer than men. So, in the past, life insurance would typically have been cheaper for a female applicant than the comparable male.

However, on 21 December 2012, the European Court of Justice gender directive was introduced at which point it became against the law to take gender into account when calculating life insurance premiums.

It’s thought that even after the UK leaves the EU, this law will remain in force and men and women will continue to be treated equally.

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