The obvious difference is that mortgage protection is for your mortgage while life insurance covers your life, but of course, it is not all so simple.
There are many similarities between Mortgage Protection Insurance and Life Insurance, and you may need both types of insurance when buying a house.
First-time home buyers, especially, need to understand the market when taking out insurance.
Let’s take a look at what the difference is between mortgage protection and life insurance, and maybe what they have in common, too.
What is mortgage protection in Ireland?
Mortgage protection insurance is a policy that covers your mortgage repayments if you die.
Some mortgage protection policies have a serious illness option. If you add the serious illness option to your policy, the insurer may pay the remainder of your mortgage if you contract a named serious illness.
You are required by most mortgage providers in Ireland to take out mortgage protection insurance. Anyone aged under 50 taking out a residential mortgage in Ireland is required by law to have mortgage protection insurance.
A mortgage protection policy covers the term of the mortgage in case you pass away, but you may be able to add extra cover for other life-changing events.
What is life insurance in Ireland?
Life insurance in Ireland is a policy that pays out a specified amount upon the death of the holder.
A life insurance policy may have a fixed term, i.e. 20 years, or it can be for the full life term of the policyholder.
Life insurance policies are usually for a fixed amount, e.g., €500,000, and the full amount is paid to the named beneficiary or beneficiaries on the policy. In the case of your death, your loved ones will receive the lump sum and can do what they want with it.
You are not required by law to have life insurance in Ireland. You can use a life insurance policy to cover your mortgage, in the case that the payout is equal to or more than the amount owed.
Life insurance policies pay out an agreed amount on your death, but with added extras, a policy can be very valuable and be of significant benefit to those left behind.
What are the differences between mortgage protection and life insurance?
There are a few differences between mortgage protection and life insurance, such as the fixed term part, but there are similarities and crossovers too.
In the mortgage protection insurance and life insurance markets, there are several types of policies. You can add specific benefits to both policy types, such as serious illness cover, but you will pay more in premiums.
MortgageOne has the experts in place to discuss your insurance options and advise on which policy type best suits your needs.
Do I need both mortgage protection and life insurance when buying a house in Ireland?
No, you do not need both mortgage protection and life insurance when buying a house in Ireland. Your mortgage provider will require you to take out mortgage protection insurance, but will not look for a life insurance policy.
In most cases, it is good practice to take out both types of insurance. If you pass away, the mortgage protection will pay off the balance of the mortgage, and the life insurance will give a lump sum to your family.
If you are lucky enough to pay off your mortgage in advance, then you can cancel your mortgage protection payments, but do keep up the life insurance ones, for obvious reasons.
There can be a great peace of mind in knowing that your family will have a roof over their heads if you are the main income earner and you pass away.
Mortgage protection is there for a reason, and it is a good idea to have it in place.
Can I use my life insurance policy to cover my mortgage?
Yes, you can use a life insurance policy to cover a mortgage, but only in certain circumstances and with the agreement of the mortgage provider.
Ways you can use your life insurance policy to cover a mortgage:
You will have to sign over the life insurance policy to the mortgage provider. It is vital to understand that if you are using your life insurance policy to secure your mortgage, then in the case of your death, the mortgage provider will take the balance of the mortgage from the insurance payout.
Your family and loved ones may only get very little of the payout, and you may need to pay out higher premiums if you increase the cover.
Your family will, though, have the security of owning the home outright without owing anything on the mortgage.
MortgageOne experts know all there is to know about life insurance and mortgage protection insurance and will walk you through your options.
