Mortgage life insurance

When you buy mortgage term cover you will be given two choices of monthly payment (premium) – guaranteed or reviewable.

If your premiums are guaranteed, your insurer will never change the price, so you'll know what you'll be paying over the life of the policy. Reviewable premiums, on the other hand, often cost less at first, but your insurer can hike costs later on, meaning a cheap deal can potentially become costly as you age.

It's important you're open and honest with any information you provide, to ensure any policy that's set up for is fit for your needs – and will cover you if the worst were to happen and your dependants needed to make a claim. 

Likely things you'll need to disclose when getting a quote for a policy include your age, whether you smoke, your occupation and your health history. The insurer then uses this information to determine whether it will cover you and a price. 

If you're comparing quotes yourself via a discount broker, you'll usually answer a few basic questions to see initial prices, but will then have to disclose much more detailed information if you then go through to the insurer to apply, which could affect the price/the decision to insure you. 

As each insurer has its own rules on pre-existing medical conditions, if you've a complicated medical history, it's worth getting advice before you buy. This is helpful as brokers tend to know which insurers will cover your condition(s), and at the best rates.

If you're over 50, you can get a policy with guaranteed acceptance – but it's much more expensive 

If you don't want to disclose health issues and are 50 or over, an over-50 policy is an alternative which doesn't require any health questions and there's guaranteed acceptance up to age 80 or 85. Yet to compensate these are much more expensive, you can't claim in the first one or two years and you could get back less than you pay in.

For full information and warnings, see our Over-50s' life insurance guide.

Mortgage life insurance policies can either be taken out to cover just you – a single policy – or yourself and your partner – a joint policy.

A joint policy is often cheaper, however, it only provides one payout, usually on the death of the first policyholder, when the cover then stops. This is usually best suited if your partner is your only dependant and you'd have no one else to leave a second payout to.

However, if you had a joint policy and were to later split with your partner, you'd need a new single policy, and this could be more expensive as it would be based on your new age and health. 

Taking out two single policies is usually more expensive, but here you would get two payouts if you were both to die during each policy term. Equally it covers you personally, so works independently to whether you are still together with your partner or not. 

If you die with an active mortgage life insurance policy, the payout forms part of your estate, which could mean it's hit with a huge whack of inheritance tax. Yet, in many cases it's possible to avoid this by writing the policy in trust, if it's done at the time the policy is taken out.

If the policy is written in trust, the insurance pays out directly to your dependants, so it never becomes part of your estate, which avoids inheritance tax and often speeds up the payout.

It's relatively easy to do as most insurance policies include the option (and papers) for writing in trust directly at no extra charge. Note that there are different types of trusts and they can be difficult to change or cancel, even if all your beneficiaries agree, so think carefully about who a payout would be going to.

If you know what you're doing, you can write the policy in trust yourself. If not, seek advice from a top advisory broker or see our guide on independent financial advisers.

Life insurance usually gets more expensive with age, so savings aren't always possible. The fact you're older, or if you've had health conditions since you got the policy, can mean new policies are more expensive than the one you have. Yet there's no harm getting a quote, especially if any of the following applies: 

• You took your policy direct from your mortgage lender (and your health is largely unchanged). If you took out a policy via your mortgage lender or without getting multiple quotes first, it's likely you could stand to save from switching policies. Plus, there's no harm in running some new quotes to check. If it shows you can save (make sure the cover is at the same level), all you need to do is set up the new cover. Once it's in force, cancel your existing policy.
  

  As MSE Eesha found: "I took out cover three years ago for £23 a month. I then decided to run some new quotes and found the SAME policy with the SAME provider for £9 a month. Over the 15 years that's left I'll save £2,520."
  

• You've since quit smoking, or you no longer have a risky job. Non-smokers pay a lot less than smokers, because they're a lot less likely to die during the term. To count as a non-smoker, you need to have been genuinely nicotine-free for at least a year and in some cases up to five years, so always check.
  

  Therefore one year after you quit, get a new quote and see if you could save big. But don't be tempted to lie. If you die and it is discovered you had been a smoker, it could invalidate the policy. If you are seriously giving up, it's a good idea to get it noted on your medical records to back up any potential claim. 

• You've remortgaged or changed properties and no longer need as much cover (and your health is largely unchanged). If you took out a policy to cover a £200,000 mortgage but have since moved, paid off a lump sum or remortgaged and you now owe much less than you were expecting, you could find a new policy covering the amount you now owe is cheaper yet still meets your needs (and your new cover will be for a shorter time period, which will help too).

Many things can happen during the lifespan of the policy, and while your broker or mortgage insurance company may be doing well now, it could be a different scenario 20 years down the line. Here's how you could be affected:

• If your insurer went bust. If your provider goes bust, the Financial Services Compensation Scheme (FSCS) will try to find another insurer to take over your policy or issue a substitute one. Equally, if you've ongoing claims, or need to claim before a new insurer is found, the FSCS should ensure you're covered. 
  

• If your broker went bust. The only payment you're likely to make to a broker will be the fee for arranging the policy, which is often no more than £25. 
  
  In the unlikely event your broker went bust after you paid it but before your insurance was arranged, the chance of you getting your money for the fee back is slim.

  The FSCS would be able to help with any premiums lost as a result of a broker going bust, as these payments are ring-fenced, but this is unlikely to extend to broker fees.