What insurance do you need with your mortgage?

Getting the right insurance to protect you and your home financially is vital. Here’s the insurance you need, and other types also worth considering.

Compulsory insurance with a mortgage

There are two types of insurance that are a condition of getting a mortgage when you buy a house in Ireland.

1. Mortgage protection insurance

Mortgage protection must cover the full loan amount and run for the full mortgage term.

It’s an insurance policy that will pay out and clear your mortgage balance if you die during this term.

It offers financial protection to both you and the lender:

  • You won’t be passing on any mortgage debt to your loved ones
  • Your lender has a guarantee that the loan will be paid off

Mortgage lenders in Ireland can only authorise a mortgage if this protection is in place unless you fall into one of the exceptions set out by law.

Types of mortgage protection

There are two main types of mortgage protection:

Reducing term cover

This cover is designed for repayment mortgages where the capital and interest are paid off.

The cover starts at the full mortgage value but reduces as the term goes on, and your mortgage is paid off. Your payments are fixed even though the cover decreases.

If you die during the term, the remaining balance should be cleared.

Level term cover

This is for interest only mortgages where only the interest of the loan is paid off, not the capital.

The cover is for the full loan amount and remains level throughout the term. This ensures that if you die at any point during the term, the mortgage balance can be cleared.

You can find out more about what mortgage protection covers, what affects the cost, and how to choose the right policy in our guide to mortgage protection in Ireland.

2. Buildings insurance

Buildings is a type of home insurance that insures the building itself and pays out if it gets damaged. It covers the cost to repair or rebuild your home if the damage can’t be repaired.

As well as the main structure of the building e.g. the roof, walls and floors, cover also extends to:

  • Your garage and any outbuildings
  • Fixtures and fittings e.g. a fitted kitchen
  • Gates, surrounding walls and patios

The most common causes of damage you’re covered against include:

  • Fire
  • Floods and storms
  • Theft and attempted theft
  • Water and oil leaks
  • Falling trees and branches
  • Subsidence

Our comprehensive guide to buildings insurance includes details about policy exclusions, extra cover you can add and how much cover you need.

Other types of insurance to consider

There are other kinds of insurance worth considering with a mortgage, as they can offer additional financial protection.

1. Income protection

Income protection, also known as salary protection, can replace some of your income if you get sick or injured and are unable to work after a set term.

Your need will depend on:

  • What company sick pay you’re entitled to
  • Other funds you have access to
  • Other insurance policies you have e.g. serious illness cover

To be eligible, you must be either:

  • Employed for over 16 hours per week
  • Self-employed

What is the deferred period?

It’s the timeframe from when you first go off sick to when the cover starts, usually set at 4, 8, 13, 26 and 52 weeks.

The shorter the deferred period, the higher the premium.

You should choose your deferred period by working out how long you could continue to pay your mortgage and bills beyond any sickness entitlements and savings.

How much of your salary can you protect?

You can protect and claim for up to 75% of your annual salary, minus any state benefits you’re entitled to.

A successful claim runs from your deferred period until you return to work, or your retirement date if sooner.

How much does income protection cost?

There are lots of factors that will affect the cost, so always get a personalised quote. Here are some of the things that the cost of your policy will depend on:

  • The amount of cover you choose
  • The deferred period
  • Your current health
  • Whether you’re a smoker
  • Whether you choose to add on any extra benefits

Who offers income protection in Ireland?

You can use a financial broker or go direct to the insurance providers that offer income protection. Here are the insurers that provide it:

To find the right plan for you, shop around for quotes and check the policy documents for full details of the cover.

You can find out more about income protection in our dedicated guide.

2. Serious illness cover

This cover, also known as critical illness cover, can pay out a lump sum if you’re diagnosed with a serious condition that’s listed in the insurer’s policy document.

You choose the amount of cover you want e.g. €100,000 and you can use your lump sum to help:

  • Cover your everyday bills and living costs
  • Pay for treatment you need
  • Adapt your home to support your needs

You can add serious illness cover to a life policy including your mortgage protection policy or get a standalone policy.

Find out more about how serious illness cover works when you add it to your mortgage protection insurance in our guide.

What conditions are covered?

The conditions vary from one insurer to another. Plus, each specified illness will have strict criteria that must be met for a claim to be successful.

For example, not all cases of cancer or strokes are covered.

Some conditions entitle you to a full payout and some only offer a partial payment. There are no ongoing payments, like with income protection.

Who is cover for?

You can usually apply for cover if you’re aged between 18 and 69 and choose a term of between 5 and 40 years, or until the age of 75.

Most policies include cover for your children too, but the maximum payout is usually capped.

How much does cover cost?

The cost depends on the amount of cover you choose and your individual circumstances e.g. your age, health, smoking status etc.

You’ll need to get a personalised quote that’s based on your responses to a number of questions.

You can choose a policy with fixed monthly payments or variable payments that track inflation.

To find out more about serious illness cover and whether it’s right for you, our dedicated critical illness guide is well worth a read.

3. Contents insurance

Contents insurance is a type of home insurance that covers the things in your home, not the building itself. This includes:

  • Furniture and furnishings
  • Clothes and shoes
  • Valuables e.g. jewellery, watches and antiques
  • Electrical items
  • Cash and documents

You can claim on your contents insurance if any items are lost, stolen or damaged e.g. from fire or flood.

Accidental damage is not usually covered as standard but you can add it to your cover.

How much cover do you need?

Any expensive items e.g. worth over €2,000 must be detailed separately on the policy. You’ll also need to know a total value of all your contents combined, to ensure you get the right amount of cover.

Most policies offer new for old cover, which replaces your items with brand new ones but some policies offer indemnity cover.

This is where the insurer estimates the value of an item based on its age and pays that amount to you in a claim.

Find out more about contents insurance and how to find the right policy in our guide to contents insurance.

So, what insurance do you need?

You can take a look at our individual guides on each type of insurance for more information.

The insurance you need will depend on your individual circumstances. However, here are a few things that can help you to decide:

You can get a combined buildings and contents insurance policy - known often just as home insurance, which can save you money. Here’s how to get the right home insurance cover.

Shop around for quotes and take time to read the policy documents of each provider you shortlist.

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Warning: If you do not keep up your repayments you may lose your home. Warning: The cost of your monthly repayments may increase. Warning: You may have to pay charges if you pay off a fixed rate loan early. Warning: If you do not meet the repayments on your loan, your account will go into arrears. This may affect your credit rating, which may limit your ability to access credit in the future. Warning: The entire amount that you have borrowed will still be outstanding at the end of the interest-only period. The payment rates on this housing loan may be adjusted by the lender from time to time. (applies to variable rate loans only) Information provided and Interest rates quoted valid at 19/10/2021