Insurance

6 things to consider when buying mortgage protection insurance

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Image Rob Flynn
Staff Writer

Mortgage protection insurance is often one of the last things mortgage seekers think about when applying for a mortgage, but there's more to it than just price.

Embarking on your first mortgage journey can be a long road. From saving for a deposit to choosing between a fixed or variable rate, there are a lot of steps along the way and things to consider before you can finally settle down.

One of the most important stepping stones to navigate when buying your first home is purchasing mortgage protection insurance, which is compulsory for most home buyers in Ireland.

This is the final guide of our five-part guide series that focuses on helping you get the best value mortgage protection insurance on bonkers.ie. In this guide, we explore the most important considerations you should keep in mind when selecting your future policy such as the type of cover you pick to when the best time to apply for it is. 

You can find the links to the other guides in the series at the end of this article. 

1. The type of cover

Mortgage protection is a form of life insurance. It pays off the outstanding balance on your mortgage should one of you pass away before it's fully repaid.

There are three different types of mortgage protection cover; single, joint, or dual. The policy you opt for will depend on whether you are getting a mortgage by yourself or with your partner. 

  • A single policy: If you're getting a mortgage by yourself then you will take out a single policy. 
  • A joint policy: This policy covers both you and your partner and will pay off the remainder of your mortgage should one of you pass away. The policy will then cease.
  • A dual policy: This type of cover will pay out when the first policyholder passes away, but unlike joint cover, the policy will continue and pay out again if the second policyholder dies during the term of the policy.

For this reason, dual policies are usually slightly more expensive than joint policies but sometimes not by very much.

2. Who to buy it from

When taking out a mortgage in Ireland most lenders will have their own insurance product which they will offer you. However, banks and lenders are tied to only one insurer and will not be able to compare the whole market to find you the best deal.

As a consumer you are under no obligation, as convenient as it may be, to buy mortgage protection from your lender.

As a rule of thumb, it is usually cheaper to look elsewhere for cover and we would always advise first-time buyers to shop around before signing up to the first offer they receive, especially when it's possible to get a better deal elsewhere.

Using an insurance broker like bonkers.ie can be one of the easiest ways to compare mortgage protection cover across multiple insurers in order to get the best value and you can run a comparison in only a couple of minutes. With our team of in-house insurance specialists we can even get you covered in under one hour when you apply with us online.

3. Whether to include serious illness cover

Taking out a standard mortgage protection policy will ensure your mortgage is paid off in the event of your untimely passing. However, it won’t provide you with cover if you are diagnosed with a serious illness, and the mortgage will still need to be paid.

Including serious illness cover as an additional level of protection will ensure a tax-free lump sum is paid out if you are diagnosed with a specified serious illness before your mortgage is fully repaid. Although serious illness cover is not a requirement, it can often be an extra comfort and form of security for those buying their first home.

If you want to add this to your policy, you can do this during the call-back stage with our insurance teams once you have applied for a policy. 

It’s important to note, that adding this to your cover will increase the cost of your premium. 

4. When to apply

This can depend on a number of different factors, but whatever you do, don’t leave it until the last minute!

The best time to apply for mortgage protection is generally between four and six weeks before the official drawdown of your mortgage, especially if you have a medical issue.

A person with a medical issue 

If you have a medical issue purchasing mortgage protection may not be as fast or as easy as getting other types of insurance such as home insurance. 

This is because your insurer may request a medical report from your doctor or specialist. This could take a few weeks to arrange depending on your illness. Further tests and reports may also be required depending on what the medical report says. 

A person in good health

However, if you’re in general good health it’s possible to get cover in under one hour with bonkers.ie. This fast turnaround time is possible as all we need is a digital signature to get your policy in place, as quickly as you need it.

You can learn more about when to apply for mortgage protection in this blog.

5. Whether to include guaranteed insurability

With this benefit, your insurer guarantees you the right to purchase additional cover in the future without having to undergo a new medical examination or provide evidence of good health.

So how might this benefit me?

Let's look at an example:

  • You and your partner buy a starter home with a mortgage of €200,000 and a mortgage protection policy for the same amount.
  • A few years later you've had kids, moved up in your careers, and want to buy a larger home for around €350,000.
  • When you apply for your mortgage top-up you'll also need to apply for extra life insurance cover.
  • However, you'll need to undergo medical underwriting all over again.
  • If your health has deteriorated in the meantime you could have trouble getting increased cover, meaning you may not get your new mortgage either.    

But with guaranteed insurability, your insurer has to give you the extra cover (up to a certain limit, which will be outlined in your policy terms and conditions). 

Guaranteed insurability, which can sometimes go by different names depending on the insurer, comes as standard nowadays with many mortgage protection policies, but it's still a good idea to check if it's included and to verify what amount is covered. 

6. Whether to include waiver of premium benefit

This is another important benefit for you to consider. 

If you're unable to work due to illness or disability, some insurers will pay your mortgage protection premiums for you until you get better and can work again. In other words, they'll waive your premium for you. 

The payments aren't started immediately though - you usually need to be unable to work for a period of at least 13 weeks before anything is paid, and with some insurers, it's up to 26 weeks. 

Again it's quite common with mortgage protection policies these days but it's always a good idea to check.

Visit our mortgage centre

Our mortgage centre is your one-stop-shop for all your mortgage-related needs. 

Once there, you can use our free comparison tools to find the best value mortgage protection policies and mortgage rates on the market. 

You can even submit a mortgage enquiry through our mortgage broker service and have one of our in-house advisors call you back to get your application started. 

Did you know that you can also compare deals across energy, broadband, banking, and other insurance products? So, see how much you could save on your everyday bills today!

Looking for more information?

If you found this guide useful, why not check out the other guides in the mortgage protection series?

Remember you can keep up to date with our insurance-related news by checking out our blog and guide pages.

Get in touch

Do you have any questions about mortgage protection insurance? If so, we’d be happy to help. You can get in touch with us on our social media pages. We’re on Facebook, Twitter and Instagram.

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