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Irish Life Financial Services Limited
Here's What You Need to Know About Mortgage Protection Insurance Before Buying a Home
October 13th, 2023
• 2 min read
Written by Irish Life Financial Services
One of the biggest milestones in our lives is buying our first home. These days, especially, it’s a hard-won prize that marks years of effort and saving.
It isn’t unusual for first-time buyers to have a number of questions about mortgage protection insurance, its significance, and why it’s needed. If this sounds like you, look no further!
What is mortgage protection?
Simply put, if you die before your mortgage is fully repaid, your mortgage protection plan pays a lump sum to your mortgage provider to pay off your remaining balance.
This is, of course, so long as your mortgage payments are otherwise up to date and your interest rate has not, on average, risen above the rate forecasted initially.
Do you need life insurance for a mortgage?
If you’re a first-time buyer, a mortgage protection plan may not be the most exciting item on your to-do list. However, it should be amongst your top priorities as it needs to be in place before a mortgage can be drawn down.
Though small, it’s a crucial step in the buying process!
Next steps: Get a mortgage protection quote
What is the difference between life insurance and mortgage life insurance?
Other forms of life insurance and mortgage protection can be quite similar. However, not all types of life insurance cover mortgage payments.
The main difference is that life cover is typically paid to your family if you die, while mortgage protection cover is paid to the bank you have a mortgage with. Because of this difference, the amount of cover (and therefore payments you make) can be quite different between the two, depending on your circumstances.
While you aren’t required to have another type of life insurance, it’s a good idea. Life is full of surprises - unfortunately, not all of them are too pleasant! Life Insurance can help protect your family and give both you and them peace of mind and security.
Can you convert life insurance into mortgage protection?
If you wish to simplify matters, you can assign an existing life insurance plan to your mortgage provider instead of taking out a mortgage protection plan. However there are a few stipulations:
- You cover must be equal to or more than the mortgage amount
- The term must be equal to or more than the mortgage term
- If applying for a mortgage with your partner, your partner would also need to be a policy owner on the life insurance policy you wish to assign over as mortgage protection
It’s important to keep in mind that if you do convert an existing policy, your family won’t be protected to the same degree without separate life cover. When you die, the bank would take however much you still owe on your mortgage and the rest would go to your estate, but this might not be enough money for your family to live securely. It’s best to talk to an advisor about what will suit your needs and individual circumstances.
If you’d like to know more about mortgage protection, or any other life insurance products from Irish Life Assurance, book an appointment below to get a free, no-obligation consultation.
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