I pay my mortgage. Why hasn’t the cost of my mortgage protection insurance gone down?

Mortgage protection insurance is a fact-of-life, must-have for anyone buying a home in Ireland. It is one of those extras you take on, almost without thinking about, when agreeing the mortgage details. There are savings to be made here and long-term gains which should be in your pocket.

Often it is only after the first few years of the mortgage that people start asking the questions. One that is asked every day is: Why hasn’t the mortgage protection insurance premium gone down as I pay my mortgage off? The answer usually goes back to when you took out the mortgage protection.

You hear a lot about insurance when taking out a mortgage, usually from the bank. While most of what you hear may be true, you still need to do your research. You do need it, but going with the wrong provider can be an expensive mistake. Over the life of the mortgage, you could be paying thousands more than you need to in mortgage protection insurance. In some cases it’s over €5000, and that’s money which could be going on a holiday or the kids’ college fund.

Questions that you should ask when taking out mortgage protection insurance include:

Let’s take a closer look at each point.

What is mortgage protection insurance?

The quick answer here is that it covers the payment of the remaining balance in the case of your death. It is not a very pleasant thought, but you have to plan for all eventualities, especially when buying a home. The last thing you want is for your loved ones to be unable to keep up the mortgage payments. When a bank forecloses on a mortgage, the family loses their home, which happens a lot in Ireland.

Do I have to have it?

Yes, you do. Under Central Bank of Ireland legislation every mortgage must be covered by insurance.  You take out the mortgage protection insurance before drawing down the mortgage, protecting you from day one. The peace of mind of knowing that your loved ones are cared for is worth the extra cost.

Is mortgage protection the same as life insurance?

The mortgage protection vs life insurance question pops up a lot. A life insurance policy can cover your mortgage, and there are specific policies you can buy. If you have sufficient life insurance cover to pay your mortgage in the event of your death, then you do not need mortgage protection insurance. You will have to sign over the policy to your mortgage provider, and only they will benefit.

Mortgage protection insurance is cheaper than a life insurance policy, especially one that covers the enormous cost of a home loan. A mortgage protection policy offered by your bank in Ireland can be much more expensive than one from an independent broker. Over the life of the mortgage, you could save yourself €1000s in lower premiums. Worth thinking about before you put pen to paper.

Aren’t the benefits the same?

No, and here the difference is very important. With mortgage protection insurance in Ireland, your home is safe in case of your passing. If you have life insurance, your loved ones will also receive that lump sum. For a small extra monthly cost, you could be doubly benefitting your family in the case of anything happening to you. 

Having more money going to the family instead of the bank can only be good.

Why hasn’t the cost of my mortgage protection insurance gone down?

Another popular question and one that has a couple of answers. While you are paying your mortgage on time each month, your overall mortgage balance reduces. What people would expect, too, is that the mortgage protection premium would reduce in line. After all the sum insured, your mortgage, has gone down and quite a bit over the years.

As in most things in life, it ain’t that simple. An actuary has calculated the premium to meet costs over the life of the insurance cover, and that’s why you have a fixed monthly repayment. Where you can save or, in fact, make money, is by choosing the right type of mortgage protection. You may need to concentrate a bit here.

Decreasing term life cover is one choice

Probably the most popular choice on the Irish market. The cost of the premium stays the same as the balance of the mortgage reduces over the years. The mortgage protection insurance payments cease when you pay the last mortgage instalment.  Decreasing life term cover is the cheapest and most straightforward option.

Level term life cover

A more expensive option but one with a big benefit. The premium stays the same for the life of the mortgage but so does the overall amount insured. If you happen to die before the mortgage is finished, the company will pay out the original mortgage lump sum. Your home will be safe and paid for, while your loved ones will receive the balance

Do I have to get mortgage protection insurance from my bank?

No, no and no again. Your bank may not tell you this, though they are obliged to under Central Bank regulations. The market is open to all insurance providers, and there is a good choice for you when looking for cover. Do not go with the first option but weigh up your choices and think of the long term.

Taking out a mortgage is a very expensive time. Money seems to flow out the door, and bills come from every angle. Before you make any decisions consult an independent financial advisor and see which mortgage protection plan suits you. 

It could save you a lot of money in the future, if you take the right advice today.

Can you change mortgage protection insurance provider?

The good news is yes, you can, and the sooner you do so, the better. Take a look at the alternatives and see what is on offer. Consult an independent financial adviser and listen to what they say. Money not spent on costly premiums can be money in your pocket. 

Call Us

At First Quote  we are on your side. Our years of experience can help you make the right choice at a difficult time. Your mortgage provider will tell you to get mortgage protection insurance. They are obliged to, and you are obliged to get it. What you do not have to do is take the policy they offer you. 

Our simple to use calculator can help save you money over the years. Think of all the fun you could have with that extra cash, while you still have mortgage protection. Contact us today for independent advice on mortgage protection insurance and start saving today.