A guide to mortgage protection insurance in Ireland

What is mortgage protection insurance?

It’s insurance that runs for the length of your mortgage and will pay off your loan if you die during that term.

• Mortgage protection is compulsory and must be taken out when you get a mortgage. It will cover the full loan amount you borrow - also known as the sum assured.
• It works differently from a regular life insurance policy which isn’t linked to your mortgage, but mortgage protection is a type of life insurance.

They both pay out on your death but with life insurance, the sum assured is paid to your beneficiaries. With mortgage protection, it’s paid to your bank and any remaining funds are then sent to your beneficiaries after the loan is cleared.

Is mortgage protection compulsory?

Yes, having mortgage protection is a condition of getting a mortgage in Ireland. Your lender is required by law to ensure you have sufficient protection to cover the loan’s value.

It also gives you peace of mind knowing that your dependents can continue living in your home without the financial burden of paying the mortgage.

You can apply for mortgage protection insurance if you’re aged between 18 and 74.

Are there any exceptions?

There are some circumstances where your lender may decide mortgage protection isn’t necessary; these are the exceptions:

• The property the loan is for won’t be your family’s primary residence e.g. a buy to let property
• You’re unable to get this type of insurance, or you can only get it if you pay a much higher premium than most other people
• You’re over 50 when the mortgage is approved
• You already have life insurance in place that covers the full mortgage amount

Do you have to take out mortgage protection from your lender?

No, so it’s worth considering other providers before you commit.

Your lender will only offer a limited choice to offer you and you may miss out on a better deal. By shopping around, it’s likely you’ll find a policy that best matches your needs for a better price.

What happens if you stop mortgage protection insurance payments?

Mortgage protection is designed to protect both you and the lender from huge financial risk.

You mustn’t stop making payments or you’ll be breaching the terms of your mortgage.

If the worst happened and you weren’t covered, your property would be seized and your family would lose any rights to your home.

What mortgage protection insurance covers

As well as paying off your mortgage in the event of your death, there are some additional features that are either included, or you can choose to add on.

What’s usually covered as standard?

• Accidental death: This provides interim cover from when you submit your signed application and Direct Debit details, up until your application is approved or declined. If you were to die during that period, a lump sum would be paid out.
• Guaranteed insurability: This is where you can increase the level of cover or extend the term following certain changes in your circumstances without giving additional medical evidence e.g. if you marry, have a child, buy a new house.
• Terminal illness cover: If you’re diagnosed with a terminal illness and have less than 12 months to live, payment in full will be made at that time.
• Children’s life cover: If your child dies during the policy term and is 3 months to 18 years old (or 21 if in education), a set amount will be paid, usually between €2,000 and €7,000.

Who’s covered by mortgage protection?

Anyone named on the mortgage needs cover. You’ll get single cover if the mortgage is in your name only, or joint cover if you have a joint mortgage.

If two of you are on the mortgage, you have the choice of a joint or dual life policy:

• Joint cover: A joint policy will pay out on the death of the first person only, and then end.
• Dual life: Dual life protection can pay out twice, and is sometimes no more expensive than a joint policy. For example, if your partner died during the policy term, the mortgage would be cleared. Cover would then continue and if you also died before the term ended, a second payout would go to your estate.

What add ons are available?

The main add-on you can get for mortgage protection in Ireland is specified illness cover, also known as serious or critical illness cover. You may also come across mortgage insurance conversion cover or a medical second opinion service.

How much does mortgage protection cover cost?

Mortgage protection cover can start from as little as €10 a month for single life cover over a 25 year term, but read the terms of the policy carefully to make sure you get the level of protection you need.

The average cost for dual mortgage protection in 2023 is around €30, but the premium will depend on a range of factors.

What factors affect the price?

Several factors will affect the cost of your mortgage protection insurance:

• Your age: If you’re young and healthy, your premium will be lower because there’s less likelihood of a claim being made.
• Your health: You have to declare any pre-existing conditions and whether you’re a smoker as these things can increase or decrease your risk, which affects your premium.
• How much the cover is for: The higher your mortgage is, the more you’ll pay.
• Type of policy: For example, whether it’s a reducing term or level term policy which is more expensive.
• Term of the policy: The longer the term, the higher the overall cost. The policy must run for the full or remaining mortgage term if you’ve switched providers.
• Where you buy your cover: Your mortgage lender will try and sell you mortgage protection but you’re likely to pay more. This is because they generally only have one or two products to choose from, so you’re limiting your options by not shopping around.
• Who the cover is for: Single cover is cheaper than joint cover. If there are two of you on the mortgage, it usually works out cheaper to have a joint or dual policy, rather than individual policies.
• What features or add-ons you need: For example, if you choose to add on serious illness cover you’re likely to pay more.

Optional cover costs

Some insurers may provide the option to add on extra cover, like serious illness or insurance conversion cover.

What is serious illness cover?

When you add this benefit to your mortgage protection policy, it’s known as ‘accelerated’ serious illness cover. You can choose an amount up to 100% of your mortgage protection cover which can be paid out if you’re diagnosed with one of the illnesses listed in the policy document.

If you make a claim, your cover will be reduced by the amount paid out, and any remaining balance will be paid if you later die during the term.

Most policies include two lists - one that entitles you to the full cover amount, and one that entitles you to a partial payment. Learn more about serious illness cover in our dedicated guide: Should you get critical illness cover?

What is mortgage insurance conversion cover?

Once your mortgage is cleared, you can convert your policy into a life insurance policy without answering additional medical questions. So, if you’ve developed a medical condition since taking out mortgage protection, you won’t have to declare it or pay the higher premium you’d normally be charged.

This add on may not be available if you have added serious illness cover to your policy.

Is mortgage protection required if you have life insurance?

Not necessarily. If you already have life insurance that covers the value of your mortgage, you could allocate that to your lender, instead of your beneficiaries.

This would mean your mortgage would be paid to the bank on your death, and only the excess (if there was any) would go to your loved ones.

However, it is simpler to have two separate policies - mortgage protection to cover your mortgage, and life insurance for your beneficiaries.

Who offers mortgage protection insurance in Ireland?

Several insurers and financial brokers offer mortgage protection in addition to banks. Here are some of the main insurers:

• Aviva.ie
• Irishlife.ie
• Newireland.ie
• Royallondon.ie
• Zurich.ie

You can go through a financial broker for advice on the right mortgage protection for your needs.

Applying for mortgage protection

If you don’t make a full disclosure of relevant facts, including your medical details and history, it can result in the following:

1. That a policy may be cancelled
2. That any claims may not be paid
3. You have difficulty in trying to purchase insurance elsewhere

Whether you apply directly to the insurer or through a financial broker, you must answer all questions honestly, even if this means paying more for your cover.

Mortgage protection is just one of the insurance products you need when buying a house. Our guide: What insurance do you need with your mortgage? explains the other insurances to consider.