Mortgage protection is a type of life insurance that pays off the outstanding balance on your mortgage if you die before it’s been fully repaid.
It’s required by law in Ireland for all mortgage holders under the 1995 Consumer Credit Act, meaning your lender will want to see you have a policy in place before they will agree to let you draw down your loan.
However what happens when you can’t get the appropriate insurance cover in place due to illness or previous poor health? Is it the end of your dream of home ownership or is there anything you can do?
In this guide we'll explain what your options are.
Many people are under the assumption that they must take out mortgage protection insurance with their lender.
However you are free to take out a policy with whomever you choose.
Your bank will often only deal with one life insurance company which means you’re not getting a wider opinion.
By using a broker service like bonkers.ie we can talk to more insurers on your behalf.
Not all life insurance companies view illnesses in the same way and some may be prepared to offer cover for certain conditions that others won’t.
Ask probing questions from your insurer as to why you have been refused cover. Sometimes a second medical opinion might put your insurer’s mind at ease.
And find out how long you have been refused cover for. Is it a flat out refusal or is the insurer willing to look at your application again in the near future?
Sometimes an insurer might refuse you cover outright due to a chronic illness. But if refusal is due to a high BMI, high blood pressure, high cholesterol, a recent Covid diagnosis, or recent surgery for example, they might review their decision in six to 12 months’ time meaning you can reapply then.
In rarer cases you may even be declined cover due to your occupation and nothing to do with your health. Whatever the reasons, find out why.
Also, confirm if it is possible to get insurance cover for a shorter period of time or for a lower amount even. As this brings us on to our next point...
Your mortgage protection policy should be for the same amount and length of time as your mortgage.
So if you’re borrowing €250,000 over 30 years, your mortgage protection policy should be for €250,000 and have a 30-year term.
However lenders might sometimes be prepared to accept a shorter term and/or amount of cover on a mortgage protection policy if you’re struggling to get adequate insurance in place, for example cover for €250,000 over 20 years.
Negotiate with your lender and see if they’re willing to be a bit flexible. Although rare, it’s not unheard of for some lenders to accept a 10-year policy for a 20-year mortgage as a last resort.
On the flipside, if your lender isn’t willing to budge, see if you can change your mortgage to fit your insurance policy. So if you can only get cover over 20 years, see if it’s possible to repay your mortgage over 20 years instead of 30 (however this will increase the size of your monthly repayments of course so may not be possible).
If you're buying a property with a partner (and therefore taking out a joint mortgage protection policy) a lender may sometimes accept a single policy if one of you is having trouble getting insured.
When you apply for any type of life insurance your insurer will usually write to your GP asking for a doctor's report.
Depending on what your GP says, you may then be asked to undergo a medical examination or specific tests.
However GPs aren’t infallible and mistakes can sometimes be made. This is particularly true if your previous GP since childhood has recently retired and someone new has filled out the form.
Have a chat with your doctor to make sure no mistakes were made and ask them whether they think the refusal was harsh - if so an appeal can be made to the life insurer.
As mentioned at the start of this article, the requirement for mortgage protection is outlined under the 1995 Consumer Credit Act.
However the act also outlines specific cases where cover isn’t required.
Namely, if you’re over 50, are buying a house as an investment, or can prove you’re unable to get insurance, then your lender is able to waive the requirement for mortgage protection.
Usually a refusal from three insurers is considered proof you can’t get insured.
Unfortunately there are examples of lenders still refusing mortgage applications even in cases where a customer has proven they’re unable to get cover from any insurer.
So have an honest chat with your mortgage broker or mortgage advisor about whether a lender will allow you to get a mortgage or not in the event of you being able to prove you couldn’t get insured.
You can apply for mortgage protection insurance through bonkers.ie. We can't guarantee we'll be able to get you cover but we'll do our absolute best.
We deal with all of the main life insurance providers in Ireland meaning we can try find you the best quotes available for the cover you need.