Mortgage Protection Insurance
Understanding Mortgage Protection
Unlike regular Term Life Insurance where your cover level may remain the same or even be indexed against inflation, with Mortgage Protection Insurance the amount of life insurance cover only needs to match your outstanding mortgage balance over the course of your mortgage loan term, making it the cheapest form of life insurance. Although the cover reduces the cheaper price already factors this in so it remains constant.
Mortgage Protection – Quote Options & Pricing
The Policy Term
The term of your mortgage protection should match your mortgage loan term and must be expressed in whole years. If switching policy on an already existing mortgage, the term of your policy should match your mortgage, making it the cheapest form of life insurance available on the market.
The Cover Level
The life insurance cover level should match your new mortgage loan amount. If switching policy on an already existing mortgage, the cover level on your policy should match your remaining loan balance.
If wanting to include optional specified serious illness cover, you can choose any amount of serious illness cover that amounts to anything between 10% and 100% of your mortgage loan amount.
The Cover Basis
A mortgage home loan will always be in one or two names, but where there are two people named on the mortgage both need to be on the mortgage protection insurance policy.
Single Cover – covers one person under the policy.
Joint Cover – allows you to have 2 people on the one policy, but it only pays out on the first person to claim.
Dual Cover– allows for 2 people on the same policy, but provides pay-outs on both people, under separate claims. This means that once a life cover claim occurs the remaining benefits continue on the second person but at a reduced cost (see top tips above).
The price is based on your age, smoker status, and your health. So, you will need to answer some medical questions when making an application. Once your policy commences, the price is always fixed, with a choice of monthly or annual premiums.
Mortgage Protection – Automatic Benefits & Features
Most insurers or mortgage protection providers offer added benefits and features at no extra cost known as automatic cover.
- Accidental Death Benefit – A lump sum paid in the event of death caused by an accident, when the insurer is still processing your application.
- Terminal Illness Benefit – If you are diagnosed with a terminal illness your full life cover sum will be paid out.
- Children’s Life Cover – A lump sum life insurance benefit covering your children.
- Guaranteed Insurability – The ability to increase your cover in line with an extended mortgage loan, without having to make a new mortgage protection application, without a change in term and up a maximum of the original loan amount.
Mortgage Protection – Optional Benefits
Serious Illness Cover
You may also want to add specified serious illness cover to create a more comprehensive policy if so, this additional cover can be used to pay off some or all of your mortgage if, you are diagnosed with a specified illness listed on the policy.
If choosing this optional added benefit, you don’t have to go for the full mortgage loan amount, unlike your life cover amount that needs to match your mortgage borrowings, serious illness cover can be anywhere between 10% and 100% of your mortgage loan amount.
Mortgage Protection – Optional Feature
Most mortgage protection policies already include “Guaranteed Insurability” to allow for extra mortgage borrowing in your future, although a limit of up to €100,000 increase and up to your original loan amount usually applies. To fully future proof your mortgage protection insurance you can also choose to add a “Conversion Option” which adds about 5% to its cost at the outset.
A Conversion Option allows you to extend your policy cover term in line with a new or extended mortgage and to convert from a decreasing cover Mortgage Protection policy to a level cover Life Insurance policy, should more life cover be needed in the case of a change in your health. Any policy changes made through a conversion option are free from fresh evidence of health, so it protects you against a decline in your health affecting your long term costs where your mortgage needs or health needs may change.
Mortgage Protection & Your Bank
Steps to Lender Assignment
Except in the case of investment properties, your bank or mortgage lender can insist on taking ownership of your mortgage protection policy. This is done through the completion of a single page legal document called a “Notice of Assignment” that they provide to you in your loan pack.
The steps to completing your mortgage protection assignment process are as follows:
1. Obtain your mortgage protection policy schedule form One Quote.
2. Complete your bank’s “notice of assignment” witnessed by your solicitor and return it to your bank together with your policy schedule.
3. The insurance company will then note your mortgage lender’s interest in completing the process.
Only if your lender is Ulster Bank should you return the notice of assignment to [email protected]