Mortgage protection insurance
What is mortgage protection insurance?
Mortgage protection insurance pays off your mortgage if you or another policyholder dies during the mortgage term. The payment normally goes directly to your lender.
It is required by law when taking out a mortgage in Ireland, although there are exceptions, including if you cannot get cover because of your age or health. Mortgage protection does not cover your mortgage repayments if you cannot work because of redundancy, sickness or disability.
What is the difference between mortgage protection and life insurance?
| Mortgage protection insurance | Life insurance | |
|---|---|---|
| Main purpose | Clears your mortgage | Provides broader financial support |
| Who is normally paid? | Your lender | A person you nominate or your estate |
| How cover changes | Usually reduces with your mortgage | Can remain level for the policy term |
| What happens after payout | The mortgage is cleared | The payment can help with living costs, debts or other needs |
If you use a life insurance policy for your mortgage, it must provide enough cover and be accepted by your lender. Any cover remaining after the mortgage is cleared may be available to your estate or beneficiaries, depending on the policy.
Find out more about life insurance and the different types of cover available.
Where can you buy mortgage protection insurance?
- Directly from an insurance company
- Through a broker
- From your lender as part of a lender’s group scheme
What is a lender’s group scheme?
Your lender may offer you mortgage protection through a group scheme. This means the lender arranges and owns the policy, and you are added to it when you accept the offer.
The policy typically covers only the mortgage and ends when the mortgage is paid off. Because the policy belongs to the lender, you cannot transfer it to a new lender if you switch mortgages.
What types of mortgage protection can you get?
You can choose between reducing term cover and level term cover.
Reducing term cover
The amount covered reduces as you pay off your mortgage. This is the most common and cheapest type.
Level term cover
The amount insured and your premium stay the same. If you die before the mortgage is paid off, the insurer pays the original insured amount. Any balance left after clearing the mortgage goes to your estate.
Can you add serious illness cover?
You may be able to add serious illness cover, which can clear your mortgage if you are diagnosed with an illness covered by your policy.
What happens to your cover if your mortgage changes?
If you top up your mortgage
Make sure your policy covers the new mortgage amount. You can get a new policy for the total amount or keep your existing policy and buy additional cover for the top-up. Compare the costs and benefits before deciding.
If you switch your mortgage
You may be able to assign your existing mortgage protection policy to your new lender if the amount and term do not change. If your cover is part of a lender’s group scheme, the policy will be cancelled when you switch. Make sure you can get replacement cover before switching.
If you pay off your mortgage early
You may be able to cancel your mortgage protection policy or keep it until its original end date if it provides additional cover. If you have a lender’s group policy, the lender may close it when the mortgage is paid off. Always verify that it is closed to prevent ongoing charges even if you pay off the mortgage.
Having difficulty getting mortgage protection?
If you are refused a mortgage because you cannot get mortgage protection due to age or health, you can contact the Central Bank of Ireland about regulatory concerns or make a complaint to the Financial Services and Pensions Ombudsman if you believe the lender treated you unfairly.
The code of practice for cancer survivors
Since 6 December 2023, insurers that follow Insurance Ireland’s Code of Practice must ignore a past cancer diagnosis if treatment ended over seven years ago, or five years ago if you were under 18. Insurance Ireland is the representative body for the Irish insurance industry, not a regulator. For more information, visit Gov.ie.
How do you make a claim?
- Contact your insurer or broker and tell them that a policyholder has died.
- Complete the claim form as accurately as possible to avoid delays or refusal of your claim. Ask your insurer or broker if you are unsure about any information requested.
- Get your paperwork in order. You may need the original policy document and certified copies of the death certificate.
If you have serious illness cover with your mortgage protection insurance, you can claim if you are diagnosed with an illness covered by your policy.
