Mortgage Protection

BarneyMc

I'm in the process of getting a mortgage for a family home I'm building. My mortgage broker is providing me with quotes for mortgage protection but it seems expensive at €67 per month on a €120k mortgage!

I've no doubt it's the cheapest quote for what I'm getting but I'm not sure I really need all that cover. The cover is for life insurance (mandatory) and serious illness cover. Life insurance only is costing just €17 per month so the serious illness cover is jacking up the price by €50 per month!

Should I just take the life insurance and sort out the serious illness separately myself?

PaulM1977

Hi Barney,

When taking out a mortgage, all that is required to satisfy the mortgage lender is the basic mortgage protection which pays out on death. The Serious Illness cover is an add-on to the policy and that is why the cost has increased so much, as essentially if you do suffer an illness such as heart-attack, stroke or cancer(which are the main illnesses claimed against even though a policy will cover you for a lot more) the chances are that you will recover from it. There are 2 different types of serious illness that you can have on a policy, Accelerated or Standalone. Accelerated serious illness will pay out a lump sum in the event you are diagnosed with a serious illness, this payout will reduce the death benefit by the lump sum, which can be up to the full amount of the death benefit.(Mortgage Protection policies only offer Accelerated Serious Illness as part of their plan).
Standalone serious illness covers you under the same policy, but if you are diagnosed with a serious illness it will pay out a lump sum but will not reduce the death benefit by this amount.(This would be available under any other life assurance plans or on its own, without life cover).
Overall, it would prove more cost-effective to have the serious illness and mortgage protection as part of the one policy.

If you feel that the cost may be too much you may want to consider Income Protection, which will pay you up to 75% of your salary less the State disability benefit(if you are a PAYE worker) should you suffer a long term illness or injury. If you are unable to return to work, it will pay you up until the date of retirement with one provider giving you the option to take out cover until age 70. You are also entitled to obtain tax relief on the monthly premiums on this type of policy. The monthly premium will vary depending on the deferred period chosen, a person's occupation, with some people declined cover based on their job. (Bear in mind also, that some employers offer this benefit to their employees, so you might want to check with them first if they have this in place for their workers, and if they do then you would only need the basic mortgage protection)

Either way, the one thing to consider is if you are unable to work due to ill-health, how will you finance the repayments on your mortgage.

PaulM

BarneyMc

Thanks very much Paul for your comprehensive reply. You've been more helpful than my broker!

I've just checked my employer terms and conditions and it appears I have life assurance of 4 times my pensionable salary plus retirement fund in the event of my death. Regarding income replacement, they'll pay 75% of pensionable salary until recovery or retirement.

So, it looks like I really only need the mandatory life cover as the above policies would cover the mortgage repayments cost.

Thanks again Paul!

PaulM1977

No problem, glad to help and also saved you a few quid every month.
Best of luck with the construction of your new home.

PaulM

Carawaystick

I would very much doubt 17 pcm on a 120k loan is the best value life cover. I pay 18.30 or so on a 25 yr 240k loan.

check quotes on labrokers or the like to keep your broker honest.

BarneyMc

Carawaystick wrote: »

I would very much doubt 17 pcm on a 120k loan is the best value life cover. I pay 18.30 or so on a 25 yr 240k loan.

check quotes on labrokers or the like to keep your broker honest.

I checked against an online site and it's about right. I'm 40 and that's a big consideration too so it's not all down to loan amount and term.