Paying off a mortgage can be a struggle, even for families with two incomes. If you or your partner should suffer a terminal illness or even die, that struggle increases dramatically due to medical expenses, funeral expenses and lost income. For this reason, it's a good idea to consider mortgage life insurance, which will enable your dependants to pay off the mortgage if you should die or become terminally ill.

There are two types of mortgage life insurance. With level term mortgage insurance, the amount you're insured for stays the same over the life of your mortgage, whereas with decreasing term mortgage insurance, the amount you're insured for decreases as the amount you owe on the mortgage decreases. In both cases, the policy is terminated automatically when a claim is made or when the mortgage is paid in full without a claim being made.

The cost of your mortgage life insurance policy depends on the size of your mortgage and the length of time you require the policy for, as well as whether you choose level term or decreasing term insurance. In addition, the size of your premium will depend partly on your lifestyle and physical health, just as it does for life insurance.

Decreasing term mortgage insurance is typically less expensive than level term insurance, because the sum that would be paid out in the event of a claim decreases over time. The type of insurance that will best meet your needs depends mostly on what you can afford. If money is tight, decreasing term insurance is easiest to manage, since your insurance premiums decrease as you pay off the mortgage. Level term insurance is the best option if it's not prohibitively expensive, as it means there may be extra money left over for your dependants once the mortgage is paid. This is also a good option if you have an interest-only mortgage, since you do not build up equity in your home quickly with this type of mortgage, and your mortgage repayments increase over time.

If your mortgage is jointly owned by you and your partner, you'll need to take out joint mortgage life insurance. This policy pays out if either you or your partner dies before the policy term ends. If the mortgage is not held jointly, you and your partner must take out separate insurance policies. Depending on your circumstances, either one of these options may be more advantageous-it's not always a matter of simply choosing the cheapest.

Your mortgage lender will most likely recommend that you get mortgage life insurance when you get a mortgage. They will also probably recommend that you purchase a policy from them or their company, however this is not necessary and is often more expensive than it would be if you chose an independent insurance company.

Regardless of which insurance company you choose, it's always important to check the fine print and make sure you understand exactly how the coverage works, and whether there are any situations where your policy might not pay out. Not all mortgage life insurance policies pay out in the event of terminal illness, so this is something you must investigate thoroughly before committing to a policy.