Life Insurance often a better option than mortgage protection insurance
Mortgage protection Insurance is a form of Life Insurance.These policies are designed to clear the full balance on a mortgage, in the event of the passing away of one of the policy holders or the policy holder in a single person policy.
It is required as a form of security by lenders, but more importantly it is of great comfort to a surviving spouse or partner, in that they no longer have to to worry about meeting mortgage payments.
The balance due on a mortgage reduces over time to zero.
Take a €250,000 policy over 30 years for a couple, both aged 35, non smokers..The mortgage protection premium will cost €23 per month.
At the end of year 20 the balance remaining on the mortgage is €109,154..If the policy holder passes away at that time, this is the amount the life Insurance Company will pay out. See our capital and interest calculator Capital and interest calculator.
If instead of taking out a mortgage protection policy a person chooses to take our a term life insurance policy, the premium would work out at €36 per month. With a life insurance policy the sum assured does not change during the policy term - in this example the life insurance payout, in the event of a claim stays at €250,000.
Therefore for €13 extra per month the additional payout is €250,000 minus €109,154 or €140,846. So with the life insurance policy your mortgage gets paid off and the surviving policy holder has additional funds of €140,846 at time when they will be needed.
We would recommend you seriously consider using a term life insurance policy as security for your mortgage as opposed to a basic mortgage protection policy for the reason outlined above.
In addition as the payout on a life insurance policy remains the same, these policies are suitable as security when you are changing house and can be used for multiple mortgages, without providing further medical evidence.