Mortgage protection for the self-employed is usually a decreasing or level term life policy that pays out if you die during the term, so the money can clear or reduce the mortgage. It is a personal policy in your own name, so it does not rest on an employer or a business. How insurers read a sole trader’s or director’s work and health is a fair first question for an FCA-authorised broker; sending the form on this page brings that broker’s call, free.

What does mortgage protection mean when you work for yourself?

The phrase covers two lump-sum choices, both life insurance, and neither depends on how you earn a living. LV= describes the first: “Decreasing cover is designed to cover reducing amounts owed on capital and interest repayment mortgages.” The amount you are covered for falls each year while the premium stays the same. The second is level cover, where the amount is fixed for the whole term, which suits a mortgage you want fully covered until the end or one you do not expect to shrink.

LV= also adds a warning: “Worth noting that it’s not suitable if you are using it to cover an interest-only mortgage.” With an interest-only loan the debt does not fall, so the amount of cover has to hold up as well. How the two types are built and how they differ is set out on decreasing versus level term cover, and the basics of the product are on what mortgage life insurance is and how it works.

Is underwriting any different for a self-employed applicant?

The application still asks about your health, smoking and lifestyle, and the law puts the same duty on every applicant. Section 2 of the Consumer Insurance (Disclosure and Representations) Act 2012 says: “It is the duty of the consumer to take reasonable care not to make a misrepresentation to the insurer.” What counts as the right answer on a medical question is explained on the page on medical questions for life insurance.

Work is one of the questions. Guardian’s underwriting guide, written for advisers, lists “What is your job?” for every applicant and keeps “Are you self-employed?” among its income protection questions. Its financial checks turn on the amount: for life cover over £1.5 million it asks for financial evidence, usually a questionnaire, and “For very high cover amounts, we’ll ask for independent third-party evidence such as a loan offer letter, or for an accountant to sign the financial questionnaire.” What insurers may ask a self-employed applicant to show about income is covered on life insurance for the self-employed.

Anything that depends on your own accounts or health can be put to insurers by a broker after you send in the form here.

Can a self-employed policyholder add cover later without new health questions?

Some policies have a guaranteed increase option: after set life events you can add cover without answering health questions again, within limits. LV=’s Life Protection policy conditions (document reference MIMILP16) include a mortgage increase from moving home or doing home improvements, and give as example evidence “Your mortgage offer and proof of your previous mortgage amount.” The time limits, age limits and caps for LV= and other insurers are set out on increasing the cover on a term policy.

The pay-rise event is where self-employment matters. LV= offers an increase after a basic salary rise of at least 10% from a new job, a promotion or a recognised qualification, then says: “This option isn’t available for self-employed people or if you are (or related to) the owner, director or partner in the company you are employed by.” Other insurers word their events differently, so the policy conditions sent with a quote are the place to check which events a self-employed person can use.

Personal cover or business cover: which one protects the mortgage?

A home loan is usually in your own name, and the cover that matches it is a personal policy on your life. Business policies answer other questions. Key person insurance protects a firm against losing someone it depends on, as key person cover for a sole trader and key person versus relevant life cover explain, and business loan protection covers borrowing the firm took on.

Relevant life cover, which a company buys for an employee, is a business route that is closed to sole traders. Aviva’s key features say: “a sole trader (in their capacity as business owner), an equity partner in a partnership or a member of a limited liability partnership aren’t employees so can’t be covered under relevant life insurance.” Aviva adds that “An employee can include a single director of a limited company on PAYE”, so a company director’s position differs; what relevant life insurance is and death in service for the self-employed cover that ground. Whether a company-paid plan could sit alongside a personal mortgage policy is for the broker to raise with insurers on your free call.

Unsure which shape of personal policy fits your loan? Matching cover to a self-employed borrower’s mortgage suits a phone conversation with a broker, without cost; a request via the form on this page books it.

Frequently asked questions

What if I want cover for the repayments while I cannot work?

That is a different product from the life cover described here, which pays a lump sum on death. Mortgage payment protection insurance is covered, with its cost, on mortgage payment protection insurance cost.

Does it matter that I have only just started working for myself?

Guardian’s adviser guide raises the point under income protection: “For any Income Protection cover amount, we may request a financial questionnaire for those who have been self-employed for less than a year.” How a given insurer would view a short record for a mortgage policy is something a broker can ask on a free call.

Do I need a different policy if my mortgage is interest-only?

Aviva’s life insurance FAQs explain why: “If you have an interest-only mortgage, your outstanding mortgage loan stays the same until you repay it at the end of the mortgage term.” They add: “Level life insurance could cover this type of mortgage.” The page on whether you need life insurance for a mortgage goes further.

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