mortgage protection cover

km79

this is an area i dont really understand!
when we took out mortgage 5 years ago we got standard mortgage protection cover for the mortgage amount over the life of the mortgage with Irish Life and it costs 42 euro a month.
ive not really thought about it much until now. i wnet onto their website and typed in the current mortgage amount and term left and it came out at 30 a month.
is this something I should be changing each year or should it be left at the original amount of cover? if so should I shop around based on original cover amounts?

HowFinancial

Mortgage Protection is something worth reviewing. I frequently do this for people and very frequently find savings similar to what you just outlined.

Quick word of caution. Never let your mortgage protection lapse with your old provider until you have your new policy in place.

tHE vAGGABOND

I lost a bunch of weight, went back to mine and monthly rate was halved - always worth shopping around every so often

km79

The bit that confuses me is this - when I start shopping around do I base the quote on current mortgage balance and remaining term or the original mortgage and term?

Ilovelucy

We have just reviewed our mortgage protection and the quote was based on amount of mortgage remaining over term left outstanding.

km79

Ilovelucy wrote: »

We have just reviewed our mortgage protection and the quote was based on amount of mortgage remaining over term left outstanding.

When you say we reviewed do you mean you priced around yereselves or had someone do it for ye ?
Apart from Irish life who else does it ?

coylemj

km79 wrote: »

When you say we reviewed do you mean you priced around yereselves or had someone do it for ye ?
Apart from Irish life who else does it ?

The policy itself is a term life policy with a reducing benefit, it starts and it ends on given dates and the benefit reduces as the policy progresses, tapering down to zero at the end of the term. Pretty much all the life companies do it, they'll typically give you an instant quote on their websites.

You only need to get cover for the current balance and the remaining term, same as if the loan was being taken out today. Think of it like car insurance, you have to have it, you can chop and change supplier as much as you like but you need to make sure there's no break in cover.

Here's two to get you started...

http://www.aviva.ie/online/protection/life-insurance/calculator/
http://personalbanking.bankofireland.com/insurance/family-protection/


You need to tell the insurance company to note the interest of your lender on the policy but when you tell them you want the policy for mortgage protection, they'll ask you to name your lender anyway.

Liam D Ferguson

Be careful that the expiry date on the new policy is on or after the expiry date of your mortgage. For example, if your mortgage expires in November 2032, don't take out a 20 year policy that expires in July 2032. Take out a 21 year one that expires in July 2033. Or wait until November.

Be careful also that the amount is correct. If your current mortgage balance is €100,124, don't take out a policy for €100,000.

Although these may seem like trivial points, lenders can refuse to accept the new policy unless you get them right.

Incidentally, you don't get the interest of the lender noted on the mortgage protection life insurance. That only happens with property insurance. Life insurance companies won't note an interest on the policy itself. After the policy has been issued, the lender may or may not take an assignment over it.

km79

after ringing Irish Life it turns out it is a Life Insurance policy rather than a mortgage protection policy. the difference seems to be that if one of us dies the mortgage is paid off but the spouse is also paid the balance between the sum insured and the remaining mortgage. whereas a mortgage protection policy pays off the remaining mortgage amount only?
there seems to be a difference of at least 10 euro a month in the 2 types of policy but would it be short term thinking to switch to mortgage protection instead?

HowFinancial

Do you have a requirement for Life Cover outside of your mortgage protection? What is the current level of life cover that you require? Does your current policy exceed/fall short of this? Do you have health issues now that you didn't have when you took out your mortgage?
These are all questions you would be best discussing with a Financial Planner or broker. Recommend you discuss with financial planner who deals with Irish Life and all of the main providers in the market as they will be able to give you unbiased advice and shop the market for the best value for you.
In most instances I find it suits best to have a life cover policy separate to the mortgage protection policy.

tony81

Mortgage protection is a type of life cover policy. The amount it pays out decreases over time, so it should only cover the mortgage and leave nothing left over.

Other types of life cover are level term (where the amount covered doesn't decrease), and also joint life cover (which can pay out twice if both you and your spouse died during the term of the policy). It sounds like your policy may be both these types.

Another consideration is specified illness cover, which also pays out for certain illnesses. Given the price you're paying, I doubt your policy has it.

As for whether you should cut back on your cover by changing to mortgage only cover:

1. Considering you've already paid the higher premium for 5 years, if you tried to take out an identical policy now the cost would be greater. So you're sort-of getting a good price.
2. Do you have any other type of life cover? Perhaps a death in service benefit at work? If so, you may feel you cannot justify the extra expense of higher life cover.
3. Has your health worsened? If so, it would cost considerable more to take out a new life or mortgage policy. In which case, it's a good idea to hold on to your existing policy.

When you're shopping around, quote current mortgage amount and term remaining. Note that most insurers have a minimum premium of between €10-€15 regardless of the level of cover, and also you are not necessarily getting the best price by going direct to the insurer (a broker may get you a better price)