What Exactly Is Mortgage Protection?

Understanding Mortgage Protection

What is Mortgage Protection?

• Mortgage protection is essentially a life insurance contract that pays off the mortgage balance if one of the borrowers passes away.

• The primary purpose of mortgage protection is to relieve the bank from pursuing outstanding debts after a borrower's death.

Types of Mortgage Protection Policies

• There are two main types of policies: decreasing cover, which reduces over time, and level term insurance, which remains constant throughout the policy duration.

• In a decreasing cover policy, coverage decreases as the mortgage balance decreases; for example, it may drop from €300,000 to €150,000 over 15 years.

• Level term insurance maintains its value (e.g., €300,000) regardless of how much is left on the mortgage at any point in time.

Choosing Between Policies

• While decreasing cover might be cheaper initially, level term insurance provides more security by ensuring full coverage until the end of the term.

• It’s advised not to purchase life insurance directly from banks since they typically offer limited options tied to one insurer.

Market Comparison and Options

• Various companies like Aviva, Irish Life, Royal London, and Zurich offer different products with varying terms and conditions.

• Important factors include children's coverage options and maximum age limits for policy continuation; some companies allow coverage up to 90 years old.

Importance of Quotations and Features

• Price sensitivity is common among consumers; however, opting for the cheapest option may not always be beneficial in terms of long-term needs.

• A quotation example shows that Aviva offers competitive rates but also highlights features like conversion options without needing fresh medical evidence when renewing policies.

Final Recommendations

• It's crucial to review existing mortgage protection policies regularly to ensure they meet current needs and provide adequate coverage.

• Seek professional advice rather than relying solely on bank offerings for better product selection tailored to individual circumstances.