Buying your first home is one of the biggest financial commitments most people will ever make. With mortgages often stretching over 20 to 30 years, many new homeowners ask, what’s the best insurance cover when buying a house in the UK?
The answer is life insurance. By arranging the right policy, you can make sure that if you pass away, your loved ones will not be left struggling to keep up with mortgage repayments. Two of the most popular options for homeowners are level term life insurance and decreasing term life insurance.
Why life insurance is essential for new homeowners
A mortgage is a long-term financial responsibility. Without protection, your family could face the risk of losing the home if you were no longer there to contribute. Life insurance ensures:
- The mortgage can be paid off in full
- Your family keeps the security of the home
- Bills and other living expenses can still be covered
As a first time buyer, the right life insurance policy for you will depend on the amount of cover you need, and your budget. Here’s a breakdown of two options for life insurance for first time buyers.
Level term life insurance
Level term life insurance pays out a fixed lump sum if you die within the policy term. The payout amount stays the same throughout the policy. This lump sum can be used for anything.
Best for
- Families who want extra financial protection beyond the mortgage
- Leaving a guaranteed lump sum for children or dependants
- Can be used for mortgage, bills, and future expenses for family
Pros
- Guaranteed fixed payout
Flexible for more than just paying off the mortgage - Premiums remain the same for the whole term
Cons
- Can cost more than decreasing term insurance
- You may end up over-insured if you only want to cover a repayment mortgage
Decreasing term life insurance
Decreasing term life insurance is designed for repayment mortgages. The payout reduces over time, in line with your mortgage balance, so the policy always covers the amount you still owe.
Best for
- Repayment mortgages, where the debt reduces each month
- Homeowners looking for affordable protection directly linked to their mortgage balance
Pros
- Usually cheaper than level term insurance
- Matches your mortgage balance, so you do not pay for cover you no longer need
- Simple, mortgage-focused protection
Cons
- Payout reduces each year, so it may not provide extra funds for family expenses
Direct comparison: level term vs decreasing term
| Feature | Level term life insurance | Decreasing term life insurance |
| Payout amount | Stays the same throughout the policy | Reduces in line with your mortgage |
| Best suited for | Interest-only mortgages or wider family protection | Repayment mortgages |
| Cost | Generally higher | Usually more affordable |
| Flexibility | Can cover both mortgage and extra expenses | Focused purely on the mortgage |
Why act now
There is no best option but simply the one that suits all your needs. That’s why it’s important to speak to one of our specialists to understand what level of protection you need.
The earlier you put a policy in place, the more affordable it will be. You can even add on other policies like critical illness protection, which pays out a lump sum if you are diagnosed with a serious illness. There’s also income protection, which pays a monthly sum if you are signed off for a doctor and replaces the lost income.
As a life insurance broker, IGotCover specialists can compare policies from leading UK insurers and find the best option for you. Speak to one of our specialists today, get your free quote and take the first step towards protecting your family’s financial security.y.
