Mortgage life insurance: The need-to-knows
Mortgage life insurance – also referred to as mortgage protection – is a type of life insurance that pays out if you die before you finish paying your mortgage, ensuring that your spouse and dependants don’t need to worry about the monthly repayments.
It can be called mortgage life insurance or assurance. You insure something that MAY happen, while you assure something that WILL happen. Death is of course assured, but as the question is “will you die before your mortgage is paid off?” many call it insurance, and here’s what you need to know.
Term life insurance vs. mortgage life insurance
Both term insurance and mortgage life insurance provide a means of paying off your mortgage. With either type of insurance, you pay regular premiums to keep the coverage in force.
But with mortgage life insurance, your mortgage lender is the beneficiary of the policy rather than beneficiaries you designate. If you pass away, your lender is paid the balance of your mortgage. Your mortgage will go away, but your survivors or loved ones won’t see any of the proceeds.
In addition, standard term insurance offers a level benefit and level premium for the term of the policy. With mortgage life insurance, the premiums may remain the same, but the value of the policy decreases over time as the balance of your mortgage declines.
Life insurance and mortgages
If you’re thinking of buying a mortgage, then you ought to be thinking about taking out a life insurance policy too. Find out how using some of your income today can protect the financial interests of your loved ones if you pass away.
Life Insurance: this could pay out a cash sum to help pay off the outstanding mortgage if you die during the length of the policy. The amount of cover you choose will remain the same, unless you make any changes to your policy.
Decreasing Life Insurance: this is designed to help protect a repayment mortgage so the amount of cover reduces roughly in line with the way a repayment mortgage decreases. Always check that the interest rate applied to your mortgage does not become higher than the interest rate applied to your policy.
Not everyone needs life insurance (also known as life cover and death cover). But if your children, partner or other relatives depend on your income to cover the mortgage or other living expenses, then the answer is yes – you probably do want life insurance, since it will help provide for your family in the event of your death.
If you’re buying a home, there’s a lot to think about. As you begin making choices from finding the best mortgage rates to choosing your colour scheme, it’s good to know you also have choices when it comes to protecting your mortgage and your family’s finances from the unexpected.
While you know you’ll need insurance, it’s important to understand the different types of coverage and the different kinds of policies.
Find the best value mortgage protection cover with bonkers.ie
Mortgage protection is compulsory for mortgage holders in Ireland, but many people are paying more than they have to.
Our mortgage protection comparison service lets you easily compare prices from Ireland’s main insurance providers and is free, easy-to-use, 100% impartial and accurate.
Should you buy mortgage life insurance?
While any type of policy is better than nothing, mortgage life insurance doesn’t seem like a great idea for most families who need life insurance coverage. Generally speaking, mortgage life insurance requires you to pay the same amount of money each month for a decreasing benefit. Plus, you have no control where the payout of the policy goes or how it is used.
What Options Do I Have?
When it comes to taking out mortgage protection insurance, there are various different options available. Decreasing cover is one of the most common types of policies. This is where your mortgage debt decreases while the sum assured and your monthly premiums remain the same for a set period of time. This type of cover is a suitable choice if you want to leave your dependents with some extra funds once your mortgage has been repaid after you pass away.
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