Field notes
Protection gaps after a new mortgage
Life cover linked to a lender is rarely enough. How to size term insurance and income protection once the deeds are signed.
Many lenders offer or encourage life cover at completion. That policy often matches the outstanding balance and nothing more — it may not replace a partner's salary, cover childcare, or pay for critical illness treatment while the mortgage continues.
Start with a simple household budget: what monthly income must continue if one earner dies or cannot work for six months? Subtract any existing employer death-in-service benefit and sick pay. The gap is the rough target for term life and income protection.
Critical illness cover sits between those two. It pays a lump sum on diagnosis of specified conditions, which can clear debts or fund a career break. Not every household needs it; families with limited savings and high fixed costs usually benefit most.
Business owners with personal guarantees on commercial loans should treat those liabilities separately from the residential mortgage. A director's life policy written in trust can protect co-directors without adding to the estate for inheritance tax purposes — something we flag during Protection & Life Cover Advice meetings.
Review cover whenever you remortgage, have a child, or change employment. Policies bought five years ago rarely match today's income and debts without adjustment.