Life insurance or mortgage protection?

seanagh92

Hi all,

I am buying at house at the minute with my SO and we are at the stage where we need to get life insurance/mortgage protection.

Am I right in saying that mortgage protection only covers your mortgage (unless you choose to add on serious illness benefit, at a cost), and the amount paid out is only the balance of the mortgage. And life insurance covers your loved ones rather than just your mortgage. ?

We are not married, the mortgage will be in his name as I am not in a permanent position, and we will work out how to divide the property between us with the help of our solicitor when we get the keys.

The mortgage advisor in the bank suggested that we both get life insurance in order to protect each other should something happen to one or both of us. Is this generally recommended or is the bank just trying to rob us of more savings?

Given that we are not married and both work full time, would it be more practical for us to get mortgage protection for the minute as neither of us have dependents? Can it be upgraded to life insurance later if we wished to do so?

Any advice would be much appreciated!!

Thanks in advance!

NIMAN

You must have mortgage protection if you hold a mortgage.

It is usually a policy to cover the outstanding amount of the mortgage, so that if either party dies then the mortgage will be cleared and the loan covered. In reality it is a form of life assurance, but in different wording...the amount will reduce as your mortgage amount reduces.

Life assurance on its own is really just a policy you can take out to return an amount if one or both of you die, separate from mortgage protection. You can take out a different length of policy and for any amount.

NIMAN

Here's a quick quote from the net on the differences, which I'm sure explain it better than me.



This is a very common mortgage life insurance question. The answer really depends on what type of mortgage you have, either a repayment or interest-only loan.

Essentially, all types of life insurance are designed to payout upon death, the main difference between plans is with regards to whether the level of cover remains fixed (level term insurance) or declines over time (decreasing term insurance).

Level term life insurance represents standard life cover (also commonly used for family protection purposes) where the amount insured under the plan remains at the same ‘level’ over the term of the policy. This type of cover is usually taken out to protect an interest only mortgage where the amount of debt remains constant over time (as only interest is being repaid).

Decreasing term life insurance is often referred to as mortgage life insurance as the purpose of this plan is usually to protect a mortgage loan. Decreasing term insurance is commonly used to protect a capital/principal repayment loan as the amount of cover decreases over time so as to stay in line with the declining amount of mortgage debt outstanding over time.
Additional Life Cover Flexibility Options

Mortgage life cover also comes with some additional flexibility options over standard term insurance plans. These options relate to being able to increase cover without having to provide further medical evidence due to specific lifestyle events, such as moving home, getting married or having children (although this does vary from insurer-to-insurer).

To sum, the main difference between standard life assurance and mortgage protection life insurance is that the level of cover is fixed over time with former type but decreases over time with the later policy type.

Geuze

Always get a quote from www.labrokers.ie to compare against the bank price for MPP.