In this article, we explore the importance of protecting your most valuable asset and what the various options are. This includes key differences between mortgage protection and life insurance, helping you understand the considerations that should be factored in when saving for your future.

In 1644, English judge Sir Edward Coke was quoted as saying, “For a man’s house is his castle”. In this day and age, owning a home is a significant milestone, often representing your most significant financial investment – regardless of gender! 

It’s natural to want to safeguard your home. It is a valuable asset and protecting it ensures your loved ones are protected if the unexpected happens. This is where life insurance and mortgage protection are helpful. However, more often than not, it’s also where the confusion starts! For many, navigating the different options can be confusing. Let’s dive into the detail, shall we? 

What is Mortgage Protection?

Mortgage protection is a specific type of decreasing term life insurance designed to pay off your outstanding mortgage balance in the event of your death. The payout amount reduces over the policy’s term, mirroring the decreasing mortgage balance. This makes it a cost-effective solution for ensuring your loved ones inherit your home free and clear of mortgage debt.

Key characteristics of mortgage protection:

  • Decreasing term coverage: The benefit amount reduces over time, aligning with your diminishing mortgage balance.
  • Payout to mortgage provider: The death benefit goes directly to your mortgage lender to settle the outstanding mortgage.
  • Cost-effective: Due to the decreasing coverage amount, mortgage protection is typically cheaper than level term life insurance.
  • Ideal for specific mortgage debt coverage: This option is well-suited if your primary concern is ensuring your mortgage is paid off upon your passing.
  • Often mandatory for mortgages: Mortgage lenders will  require you to have mortgage protection in place before approving your loan, with few exceptions.

Don’t be Tied to Your Mortgage Provider

While mortgage lenders may require you to have mortgage protection in place, you are not obligated to purchase it from them. Obtaining quotes from independent life insurance providers can potentially lead to more competitive rates and greater flexibility when choosing a policy.

The cost of life insurance increases with age due to the higher risk associated with insuring older individuals.  Therefore, it’s wise to consider life insurance sooner rather than later to secure affordable coverage.

What is Life Insurance?

Life insurance offers broader protection than mortgage protection.  There are various types of life insurance, each catering to different needs:

  • Level term life insurance: This policy pays a fixed sum to your beneficiaries upon your death within the policy term. This payout can be used for various purposes, such as covering household bills or educational expenses for your dependents.
  • Increasing term life insurance: Similar to level term insurance, this option provides a lump sum payout to your beneficiaries if you die within the term. However, the coverage amount increases over time, helping to hedge against inflation and ensure the payout retains its value.
  • Whole of life insurance: Unlike term life insurance, which only pays out upon death within a specified period, whole of life insurance is designed to last your entire lifetime. As long as premiums are paid, a death benefit is guaranteed to your beneficiaries whenever you pass away.

Key points regarding life insurance:

  • Death benefit to beneficiaries: The payout goes directly to the beneficiaries you designate in your policy. Level term or whole of life policies can be partially assigned to the bank to cover the mortgage, with the remaining balance going to your beneficiaries.
  • Financial protection for families: Level term and whole of life insurance offer a safety net for your loved ones, ensuring they receive a set amount of money to maintain their standard of living if you die prematurely.
  • Flexibility for your needs: Depending on your goals, you can choose level term life insurance for additional financial security beyond mortgage coverage or whole of life insurance for a guaranteed payout to your beneficiaries regardless of when you pass away.

Mortgage Protection vs. Life Insurance: Choosing the Right Option

While both mortgage protection and life insurance provide valuable protection, they serve distinct purposes:

  • Mortgage protection: Ensures your mortgage is paid off if you die, leaving your home free and clear for your loved ones. It will not pay for living expenses, college fees or any necessities for them.
  • Life insurance: Provides a financial safety net for your dependents, offering a lump sum payout that can be used for various purposes, including mortgage payments, living expenses, or educational costs.

Choosing the right option depends on your specific needs.

If your primary concern is ensuring your mortgage is settled upon your death, mortgage protection may be sufficient. However, if you want to provide broader financial security for your family, life insurance, particularly level term life insurance, is a more comprehensive solution. Always remember to get the right advice – some insurance policies can be offset against your tax liability for example. 

Review, Revise, and Renew

Your life circumstances will evolve over time, and your insurance needs will likely change as well.  When determining the amount of coverage you require, consider how much income your family would need if you were no longer able to provide for them. As your family grows and ages, it’s essential to review and potentially adjust your coverage to ensure it remains adequate.


Here to help you save for today, tomorrow and for the unexpected.

At Lynx Financial Services, our team of experienced financial advisors are dedicated to helping you achieve your financial goals. We understand that everyone’s circumstances are unique, and we take a personalised approach to financial planning. 

We’ll work with you to assess your needs, risk tolerance, and investment goals, and develop a tailored plan to secure your financial future. Let us help you navigate the complexities of financial planning and make informed decisions about your retirement income. 

Contact Lynx Financial Services for a free consultation. No jargon, no hidden fees, just plain talking, strategic financial advice.