What is Mortgage Protection?
Mortgage protection is a type of insurance that Irish mortgage holders have to take out when they get a mortgage. Your mortgage lender is actually legally required to confirm that you have mortgage protection in place before they give you the mortgage as part of the 1995 Consumer Credit Act.
Is Mortgage Protection the Same as Life Insurance?
Mortgage protection insurance is not the same as life insurance. Mortgage protection insurance is however a type of life insurance that pays out if you or your partner dies during the term of the mortgage. The policy will pay off any outstanding balance of the mortgage to the lender.
When Do You Need to Get Mortgage Protection Insurance?
Like a lot of things when buying a property, you should get organised as much as possible when you are sure you’re ready to apply for a mortgage itself. For example, don’t wait until you have secured a property or gone sale agreed as the application time for mortgage protection insurance can be as long if not longer than applying for the mortgage loan itself. This is of course dependent on your health situation for example. So the best advice is that when you are in the midst of applying for a mortgage, start shopping around for the insurance. You will have a fair idea at that point of how much you will be approved for so it’s a starting point at the very least. Some insurance brokers will approve your application for the insurance and “hold” it for a number of months but just be aware of the time constraints in advance.
Do Both People (when you’re a couple) Need Mortgage Protection?
In mortgage protection insurance there is a policy that provides “joint” cover and also one called “dual” cover. Joint cover can include two people but it only pays out on the death of the first person; the cover ends after that happens. With dual cover, both people are covered and if one dies, the cover remains in place as insurance for the second person. You can ask a mortgage protection broker about this cover differential. With some providers, the dual cover does not cost extra but you would need to specifically request the cover.
Is it Hard / Difficult to get Mortgage Protection?
It is not difficult as such to get mortgage protection insurance in Ireland but you will need to get it organised yourself as part of your home buying journey. Difficulties in getting mortgage protection insurance can arise if you have suffered a previous serious illness or currently have a serious illness. However, all policies vary so it is a good idea to get advice from a mortgage insurance broker before applying. The broker will be able to advise you on which policy to apply for to have the best chance of cover should you have some specific illness that you’re concerned about.
Ensure also to apply at an early stage for mortgage protection as leaving it until a late stage may delay your mortgage itself thereby frustrating the whole process.
Do I Have to Purchase Mortgage Protection from my Mortgage Lender?
You don’t have to get mortgage protection insurance from the same place that you’re getting a mortgage. The main point to remember is to shop around for the best rate as well as the best cover for your requirements. There are many providers of mortgage protection insurance on the Irish market and a quick search on Google will allow you to source some quotations.
Types of Mortgage Protection Insurance
The most common type of mortgage protection insurance cover that people in Ireland take out would be “reducing term cover”.
- Reducing Term Mortgage Protection
With this type of cover, your premium remains the same for the duration of its term but the cover reduces as the mortgage loan amount outstanding also reduces. The policy will end when the mortgage is paid in full.
- Level Term Mortgage Protection
Under this cover, your premium remains “level” as does your cover so if you die before your mortgage term is out, the payout relates to the original mortgage amount, not what is remaining. Once the mortgage is paid off, any excess amount remaining would go to your estate.
- Serious Illness (Add-On) Cover
This type of insurance will cover should you develop a serious illness at some stage of the term of your mortgage. The list of serious illnesses covered would be well defined as part of your policy and the premium would obviously cost more than the likes of reducing term mortgage protection insurance for example.
- Life Insurance Cover
If you already have life insurance, you can have your mortgage included on it as long as there is no existing mortgage being covered. Check with your insurer for clarity.