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Do I Need Mortgage Protection and Life Insurance? Do I Need Mortgage Protection and Life Insurance?

AA Life Insurance

Do I Need Mortgage Protection and Life Insurance?

Published 29th May 2019Read Time 15 min

Which is worth going after?

Please note that AA IE no longer offers Mortgage Protection or Life Insurance, but please continue reading for helpful information on them.

Whether it’s an attempt to be thrifty or due to confusion over what both policies offer, not having an adequate level of cover in place could be putting your family’s future at risk should the worst happen. Depending on your circumstances, the level of coverage you may need will vary, but AA Life has put together some helpful advice below to guide you in the right direction. 

Is Mortgage Protection the same as Life Insurance?

A regular source of confusion, mortgage protection and life insurance are not the same thing. Mortgage protection is designed to pay off the remainder of your mortgage in the event of a premature death, with any claim on the policy being payable directly to your mortgage provider and not as a lump sum to your dependents. Meanwhile, life insurance is designed to result in a lump sum payment to your next of kin/dependents in the event of a claim. While these funds could still be used to pay off a mortgage, they could also assist in replacing the policy-holders income or covering the future education costs of any dependents. 



A young woman with two children sitting on sofa indoors at home, using tablet.

Why Would I Need Both?

The main reason you would need both life insurance and mortgage protection, particularly if you have a young family, relates to the difference in who receives the payout on each policy outlined above. As the payout on a mortgage protection policy will go directly to your mortgage provider, if you don’t have a separate life insurance policy in place, then your family stand to lose your income should the worst happen and are left without a lump sum payment to assist in covering future costs. As a result, while mortgage protection will help keep a roof over your family’s head, depending on your personal circumstances, a life insurance policy will help protect your family’s lifestyle. 

What if i can’t afford Mortgage Protection AND Life Insurance?

If you’re in a position where having both policies in place seems difficult to afford, then your initial focus should be on mortgage protection. When purchasing a house, your mortgage supplier will insist that you have protection in place, but contrary to popular belief, you don’t have to take out mortgage protection with your provider. In fact, it may prove cheaper  to purchase your cover elsewhere. The most important thing, however, is to research and understand how much of an impact a premature death could have on your family.

With our quick quote  system, you can get an estimate for how much either policy would cost and factor this into your decision on how much protection you need. The level of cover you require will depend on a number of personal circumstances, including how much of your mortgage is left to be paid off, the future needs of any dependents and the impact that losing your income would have on your family. However, if you wish to leave behind a lump sum to support your partner and/or dependents, then it’s important to have a life insurance policy in place in addition to your mortgage protection. Otherwise, cutting corners now to save a small amount could leave your family struggling in the future.