Mortgage Protection
Mortgage protection, also called mortgage life insurance, is a form of life insurance that's designed to pay off the outstanding balance on your mortgage in the event of your death.
The policy runs for the same length as your mortgage and ensures that if the worst happens, and you die before your mortgage has been fully repaid, a lump sum will be paid out to cover the balance that's remaining.
If you're buying a property by yourself you'll take out a single policy.
If you're buying a property with your partner you'll need a joint or dual life policy where two people are insured under the one plan.
Under a joint policy, there will be a payout on the death of the first person only. The mortgage will be cleared and the policy will then end.
With a dual life policy, there can be two payouts. There will be a payout on the death of the first person and this will clear the mortgage. The policy will then continue and if your partner also died during the policy term, there would be a second payout which would go to your estate.
Mortgage Protection Insurance
Features
- Mortgage Protection helps to protect your loved ones by paying a lump sum to help pay off your mortgage if you die
- With mortgage protection you also have the option to add specified serious illness cover at an additional cost. This will pay out if you are diagnosed with a specified serious illness, within a specified term.
- Mortgage Protection Insurance is compulsory in Ireland when you are taking out a mortgage with a lender
- Give me an Example:
Lets say you're buying an apartment for €250,000. You have a 10% deposit and therefore take out a mortgage of €225,000, which you're repaying over 30 years. In this example, you'd need a policy with cover of €225,000 over 30 years.
With Mortgage Protection the amount you're insured for decreases each year to broadly match what's left on your mortgage.
So if you were to die in year one, almost €225,000 would be paid out as that's what would still be outstanding on your mortgage. If you were to die in year 15, around €125,000 would be paid out. However, if you died towards the every end of your mortgage, maybe only a few thousand euro would be paid out as that's all that would be left on your mortgage. it is for this reason that mortgage protection tends to be cheaper than other forms of life insurance. However, as mentioned above, you also have the option to add specified serious illness cover at an additional cost. This will pay out if you are diagnosed with a specified serious illness, within a specified term.
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