Purchasing a home is one of the biggest investments most people make in their lifetime. However, what happens if the worst were to happen and you were no longer around ? How would your partner or children pay the mortgage?That’s where mortgage protection comes in.
In this blog post, we will discuss what mortgage protection is, why it’s important, and the benefits it offers.
Mortgage protection (MP) is an insurance policy against anyone named on a mortgage passing away. In the event that this were to happen then the balance on the mortgage is repaid in full. Unlike Life Insurance, mortgage protection coverage decreases as the balance on your mortgage decreases.
MP is compulsory for anyone taking a mortgage in Ireland. All Banks will request that you have it in place before you can get the mortgage. The reason for this is that in the event that anything were to happen to you (or your partner) that the mortgage would get repaid in full. This is valuable to the Bank and you and your family.
MP insurance is essential because it protects homeowners from being left with monthly mortgage payments in the event that their partner on the mortgage were to pass away. If you didn’t have mortgage protection and you were to pass away it could leave your children with the mortgage debt and the risk of the Bank repossessing the property.
Mortgage protection insurance can also provide peace of mind knowing that, in the event of the worst happening – you are covered.
MP declines in line with the amount of money remaining on your mortgage. It tends to be cheaper than life insurance as it declines over time so the risk reduces for the insurer as you pay down your mortgage
Life Insurance is for a fixed amount and doesn’t decrease over time. The benefit of Life Insurance over MP is that you can use it instead of mortgage protection (you assign it to the Bank) and any balance above the outstanding mortgage amount is paid to your estate.
As an example – if you take out mortgage protection policy for €400k over 30 years and you were to pass away after 15 years with say €200k remaining on the mortgage. In this case the policy would pay €200k – to the Bank – the mortgage is clear but your estate doesn’t get anything additional.
With life insurance, you would have taken out €400k cover and 15 years in you would still have €400k of coverage – so the Bank would get €200k and your estate would get €200k. Its more valuable to you but will be more expensive as a result. We would encourage clients to look at life insurance Vs MP and we can advise what is best for them
In conclusion, MP insurance is an essential insurance policy for homeowners. It provides financial security, peace of mind, customizable coverage, affordability, and flexibility. If you are a homeowner, it’s important to consider MP insurance to protect your investment in your home and your family.
For more information please contact Pangea and we will be happy to discuss further.
