Mortgage protection insurance is required when taking out a mortgage in Ireland. But many borrowers simply pick the cheapest option and move on. Here's why that approach often costs more in the long run.
What Is Mortgage Protection?
Mortgage protection is a policy required by mortgage lenders to ensure the mortgage is cleared in full if the policyholder passes away. It's the cheapest form of life insurance — primarily because the balance on your mortgage reduces over time, and the policy is designed to clear only the outstanding amount.
The key word there is "outstanding amount." A basic mortgage protection policy pays out exactly what you owe — nothing more.
The Case for Term Insurance Instead
A level term insurance policy offers significantly more flexibility:
- The amount insured does not decrease — unlike mortgage protection, your cover stays level throughout
- Cover can be increased to protect against inflation
- If a claim is made, the difference between the cover level and the outstanding mortgage balance is paid to your estate
- The term is not restricted to your mortgage term — you can add a buffer
- Conversion options allow you to extend the policy later without new medical underwriting
- Portability — you can use the policy as security if you move home
A Real Example From Our Team
One of our Life Insurance managers recently went through this decision herself:
"When I sat down with my husband, we decided on an index-linked convertible term insurance policy for a term slightly longer than our mortgage, and we rounded the cover up. If anything happened to either of us, we'd not only clear the mortgage balance but have additional cover — and we built in protection against inflation."
How Much More Does It Cost?
The premium difference between basic mortgage protection and a level term policy is often surprisingly small — particularly for younger borrowers in good health. The additional cost frequently represents excellent value for the added protection.
What About Serious Illness Cover?
Income protection and serious illness cover are worth considering alongside mortgage protection. These protect you if illness prevents you from working — a risk that's statistically more likely during the mortgage term than premature death.
Many of our clients combine mortgage protection with an income protection policy to create a comprehensive safety net.
Use our mortgage protection and life insurance calculators to compare your options, or speak to one of our advisors for a personalised recommendation.
