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.
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:
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.
Insurance firms introduce code of practice for cancer survivors
A new industry code of practice will disregard cancer diagnosis if treatment took place historically. This voluntary code has been introduced to improve access to mortgage protection insurance for cancer survivors.
This means that insurers will disregard a cancer diagnosis where treatment ended more than seven years previous to their application, or more than five years if the applicant was under 18 at the time of treatment.
The new code also provides cover of up to €500,000 per cancer-surviving applicants with a mortgage on their main 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?
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.
Types of mortgage protection insurance
There are two main types of mortgage protection and which one you need will depend on your circumstances. Here are the two types and why you might choose them:
1. Reducing term cover
With reducing or decreasing term cover, the cover reduces at the rate of interest you choose.
You pay the same amount each month but the amount of cover steadily decreases as you pay off your mortgage.
If a claim is made, the remaining mortgage balance at that time should be paid off.
This type of cover is suitable for repayment mortgages, where you pay off the interest and capital of the loan over a set period. At the end of the term the mortgage is completely paid off and your cover has reduced to zero.
You should choose a rate that allows for increases in your mortgage rate, to ensure there’s enough cover to clear the balance.
2. Level term cover
Level term cover is for the full mortgage balance and doesn’t reduce over time. So, whether a claim is made after one year or 21 years, the payout would be the same.
This is suitable for interest only mortgages, where the capital doesn’t get paid off, only the interest of the loan - so the mortgage value stays the same.
If you’re not sure which type of mortgage is best for you, our guide: Should you get an interest only mortgage? compares the two types.
A level term policy is more expensive than a reducing term policy because the cover doesn’t decrease.
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:
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.
Choosing the best mortgage protection for your needs
When you’re looking for a mortgage protection policy, you’ll need to consider what features will be useful to you.
Here are a few pointers to choosing the right policy:
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:
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:
- That a policy may be cancelled
- That any claims may not be paid
- 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.
If I don’t make a claim during the term, can I cash in my payments?
No, mortgage protection cover is not a savings or investment plan. It’s only in the event of a successful claim that any payment will be made.
What is the maximum term a mortgage protection policy can run for?
You can choose a term up to 40 years, but most policies must end by the time you reach 85 years of age.
What is Medical 2nd Opinion Service?
If you’re diagnosed with a serious condition, you can get a second opinion from another specialist about the diagnosis and any treatment plan that’s been given. This cover usually extends to family members too and may be included as standard or a free add-on with some policies.
Compare mortgage rates & deals
Find a range of first time buyer and home mover mortgage deals in Ireland using our comparison.