A Life assurance policy will pay out a tax free lump sum to clear your mortgage in the event of death.
The most common type of life assurance is decreasing term life cover, where the level of cover decreases in line with your mortgage balance. This is the cheapest form of life cover and usually suits a capital and interest repayment mortgage.
Level Term assurance doesn’t decrease throughout the term, so the sum assured remains the same and can be used to cover an interest only mortgage.
Both of the above types of policy pay out a lump sum if death occurs within an agreed fixed period which is usually the same term as your mortgage.