If you have a mortgage on your family home, you are legally required to have life insurance cover to pay off the mortgage, this is called mortgage protection cover.
Under the Consumer Credit Act 1995 a borrower is entitled to arrange individual mortgage protection cover with any life assurance company, through any intermediary of their own choosing. This means borrower can search the market for the most competitive cover available and can also take the cover to a new lender, if they move mortgage at a later stage.
The borrower can also choose to add optional benefits to the policy for example, specified illness. The plan will usually be assigned to the lender and in the event of the death of the life assured the proceeds will be paid to the lender to clear the outstanding balance. Once the loan has been cleared any balance will be returned to the surviving plan owner or their estate.