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Edinburgh · Scotland · UK-wide

Life insurance and protection

A mortgage is usually the largest commitment a household ever takes on, and protection is what keeps it in the family if something goes wrong. There are four core products: life cover pays out on death, critical illness cover pays a lump sum on diagnosis of a specified serious condition, income protection replaces a proportion of your income if illness or injury stops you working, and family income benefit pays a monthly income to your dependants rather than a lump sum. Prime Mortgages arranges all four across the whole of market, and the advice costs you nothing.

The four products, plainly

CoverPays out whenTypically used for
Level term lifeYou die within the termClearing a mortgage or leaving a lump sum
Decreasing term lifeYou die within the termA repayment mortgage — cover falls as the debt does, so it costs less
Critical illnessYou are diagnosed with a specified conditionClearing debt or funding time off and adaptations
Income protectionIllness or injury stops you workingReplacing 50%–70% of income until you return or retire
Family income benefitYou die within the termA monthly income to dependants — cheaper than an equivalent lump sum

The one most people get wrong

Most households buy life cover and stop there. Statistically you are considerably more likely to be off work long-term through illness or injury than to die during your mortgage term — but income protection is the least-bought of the four products.

Statutory Sick Pay is a fixed weekly amount for up to 28 weeks. If your employer offers nothing beyond it, that is the entire safety net between an accident and your mortgage payment. Income protection is the product that fills that gap, and for most people it should be arranged before critical illness cover, not after.

Getting it right at the outset

  • Write policies in trust — it costs nothing, keeps the payout outside your estate for inheritance tax, and means it reaches your family in weeks rather than after probate
  • Answer medical questions fully — non-disclosure is the main reason claims are declined; an insurer that knows about a condition and prices for it will pay
  • Do not cancel old cover until new cover is on risk — health changes, and cover you already hold at an old price is often worth keeping
  • Review at every life event — a new mortgage, a child, a marriage, a business — cover set eight years ago rarely matches today's need
  • Check what your employer already provides — death in service is common, long-term income cover much less so

Business protection

If you own a business, the same logic applies to it. Key person cover protects the business against the loss of someone it depends on; shareholder protection funds the purchase of a deceased shareholder's stake so the remaining owners keep control; and relevant life cover provides individual death-in-service benefit paid for by the company, usually as an allowable business expense.

These are frequently more tax-efficient than personal cover for company directors, and are worth reviewing alongside any commercial borrowing.

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Common questions

Frequently asked questions

Do I have to take life insurance to get a mortgage?

No. It is not a legal or regulatory requirement for a residential mortgage in the UK, and no lender can make a mortgage conditional on buying insurance through them. Buildings insurance is required. Most people take life cover because losing an income and keeping a mortgage is a difficult combination, not because they must.

What is the difference between life insurance and critical illness cover?

Life insurance pays out when you die. Critical illness cover pays a lump sum while you are alive, on diagnosis of a condition specified in the policy — commonly cancer, heart attack and stroke, though good policies cover far more. They are often bought together, and critical illness typically costs several times more than life cover for the same sum.

Should I get income protection or critical illness cover first?

For most people, income protection. You are statistically more likely to be off work long-term through illness or injury than to be diagnosed with a listed critical illness, and income protection pays out on any incapacity rather than only on a defined list of conditions. Critical illness is a valuable addition once income protection is in place.

What does it mean to write a policy in trust?

It places the policy outside your estate, so the payout goes directly to the beneficiaries you name rather than waiting for confirmation or probate. It is free to do at the point of application, usually keeps the payout free of inheritance tax, and can cut the time to payment from months to weeks. We set trusts up as standard.

How much does life insurance cost?

It depends on your age, health, whether you smoke, the amount of cover and the term. A healthy non-smoker in their thirties can often cover a typical mortgage for a modest monthly premium; smoking and existing conditions raise it significantly. We quote across the whole market rather than one insurer, and there is no fee for our protection advice.

Will an insurer pay out if I did not mention a health condition?

Possibly not. Non-disclosure is the single most common reason claims fail. Insurers will price for almost any disclosed condition — a policy that costs more but pays is worth far more than a cheap one that does not. Always answer the medical questions in full.

Related

We advise across the whole of the UK. Prime Mortgages is based in Edinburgh and knows the Scottish process inside out — Home Reports, offers over, missives, LBTT and the Additional Dwelling Supplement. But our lenders are national, and we advise clients in England, Wales and Northern Ireland every week. Appointments by phone or video, documents handled electronically, so where you live is rarely a constraint.

Not sure where you stand? Ask us.

A twenty-minute conversation will tell you what you can realistically borrow, what it will cost and whether it is worth doing. It is free, and we will tell you honestly if the answer is no.

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