Mortgage Protection Explained
Mortgage protection insurance explained
Financial institutions offering home loans require the applicant to take out a mortgage protection insurance policy guaranteeing that the outstanding balance on the mortgage will be repaid to the bank in full in the case of the borrower dying before the end of the loan period.
On the insured’s death, the insurance provider pays the outstanding amount of the mortgage directly to the mortgage provider. This type of insurance policy takes away the burden of family members having to take over the debt of repaying the loan.
Who needs to take out mortgage protection?
It depends on whose name is on the mortgage. If an individual took out the home loan, then the only obligation an individual has is to take out a policy that pays out on their death. However, if a couple took out the mortgage, both parties must have mortgage protection in place. Here, the mortgage protection policy will cover the full outstanding balance on the mortgage on the death of either of the couple.
Types of mortgage protection
There are three main types of policies available, reducing term, level term and serious illness.
The amount insured reduces in line with your mortgage debt. It is generally the cheapest type of mortgage protection insurance. In the event of death, the insurance company will pay the outstanding amount to the mortgage company to cover your debt.
Another type of policy is Level Term; this type of policy is more expensive. The amount insured does not reduce in line with the mortgage debt; it remains fixed. In the event of death, the insurance company will pay the outstanding debt to the mortgage company, and the surplus balance will be paid to the policyholder’s estate.
The third type of policy is one that not only covers the cost of the outstanding mortgage if you die, it will also payout if the policyholder suffers a specified serious illness. Thank you for visiting Compare Insurance Ireland, we hope you found this article informative. Get a cheap mortgage protection quote online or call us now on 01 9017776, you may be surprised at how much you could save!