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Mortgage Protection Insurance even though paying interest only

  • 05-03-2013 4:43pm
    #1
    MinnieM67
    Registered Users, Registered Users 2 Posts: 18 ✭


    Hi I was wondering if anyone can tell me what happens to your mortgage protection insurance even though I am only paying the interest part of my loan on my mortgage? I believe that I am not really covered now as obviously the mortgage is not decreasing as it should be so what is my best course of action. Im not really sure what my situation is going forward as my bank have not yet agreed to another period of interest only payments on my mortgage but my financial situation has not changed and I cannot see a point where I can revert to principal and interest payments on my mortgage. Any advice would be very welcome.


Comments

  • #2
    coylemj
    Registered Users, Registered Users 2 Posts: 25,622 ✭✭✭✭coylemj


    If you inform the insurance company that you want a fixed amount of cover because the principal outstanding is not reducing, they will increase the premium. If you do nothing then in the event that the insurance needs to be invoked (i.e. you or your partner dies) , they will only cover the principal that would have been outstanding at that stage if you had been paying capital+interest all along.

    If you're relatively early into the mortgage then the difference won't be huge as you tend to pay off very little capital in the early part of the mortgage so I wouldn't really worry about it.


  • #3
    MinnieM67
    Registered Users, Registered Users 2 Posts: 18 ✭MinnieM67


    coylemj wrote: »
    If you inform the insurance company that you want a fixed amount of cover because the principal outstanding is not reducing, they will increase the premium. If you do nothing then in the event that the insurance needs to be invoked (i.e. you or your partner dies) , they will only cover the principal that would have been outstanding at that stage if you had been paying capital+interest all along.

    If you're relatively early into the mortgage then the difference won't be huge as you tend to pay off very little capital in the early part of the mortgage so I wouldn't really worry about it.

    Thank you Coylemj, I will have to speak to another insurance broker about it as my mortgage protection at present is with the bank that i have my mortgage with and rightly or wrongly, Im a bit dubious about the advice my bank give me lately.


  • #4
    coylemj
    Registered Users, Registered Users 2 Posts: 25,622 ✭✭✭✭coylemj


    MinnieM67 wrote: »
    Thank you Coylemj, I will have to speak to another insurance broker about it as my mortgage protection at present is with the bank that i have my mortgage with and rightly or wrongly, Im a bit dubious about the advice my bank give me lately.

    If you took the policy offered by your own bank then you were probably royally screwed because they get a commission from the insurance company which (surprise surprise) comes out of your premiums.

    You can shop around online for mortgage protection insurance. Assuming you take out a new policy, all you need to make sure is that you get the lender's interest noted on the new policy and try to make the old policy lapse on the day the new policy starts i.e. no or very little overlap between the two policies.


  • #5
    Liam D Ferguson
    Registered Users, Registered Users 2 Posts: 542 ✭✭✭Liam D Ferguson


    coylemj wrote: »
    Assuming you take out a new policy, all you need to make sure is that you get the lender's interest noted on the new policy...

    That only happens with house insurance policies. Lender's interest isn't noted on a life insurance policy. After the life policy has been set up, the lender may take an assignment over it, but some don't bother.


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