Mortgage Protection Cover

Hi,

Firstly, thanks to this site as it has been a huge source of information whilst going through the mortgage and house purchase process.

I am looking for Mortgage Protection and have had conflicting advice from different advisors. As such I am unsure what product to get. We've contacted a few different people to try get a good view of our option:

1 - Advice from bank issuing mortgage: Get full cover in case of death (banks min requirement) + 50% Serious illness cover + consider income replacement cover for my wife in case of inability to work.

2 - Advice from 3 party issuer with obvious vested interest in selling highest premium (same as Bank). Same as option 1 mainly but didn't offer replacement income (didn't ask as didn't do a full review like the bank)

3 - Independent clinic on financial advice my wife attended through her job - Go for the minimum the bank will accept and add extra cover in ~10 years should you need. Also potentially cover inability to work. I'll add some more data to support that below.

Our situation:

25 year mortgage that is ~17% of net income

Expect to clear the mortgage in ~20 years - Variable rate. (considering asking to reduce monthly cost with over-payments rather than term, due to our age)

We are both 32, good health, don't smoke. Have private health insurance.
My wife works in public sector and has a very small risk (in our opinion) of a permanently debilitating injury through work that will stop her working in future. She has a job for life otherwise. I get a widows pension if she dies.

I work in IT in a field in strong demand for a reasonably big company. I get a good factor of salary for death in service.

Price:
Option 1 - Mortgage protection + 50% serious illness - €55/Month (Irish Life)
Option 2 - Mortgage protection + 50% serious illness - €43/Month (exact same cover as above with a different provider (Zurich)
Option 3 - Mortgage protection €16/Month + optional salary replacement cover €30/Month

So my main question is, with all of the information above what would be your recommendation and why. I'm seriously leaning towards the cheapest option but want to make sure there isn't a general consensus to opt for more than the min cover.

have I asked this question in the wrong section or just not interesting..

Mortgage protection cover is a specific insurance product to clear your mortgage in the event of death of either party until the mortgage is cleared. I.e. Option 3. You should certainly look at the other options and obtain advice on what separate protection you need in accordance with your circumstances. However, keep any additional cover separate from your MPP as this policy will be effectively owned by the bank and should not be used for any purpose other than providing life cover on your outstanding mortgage.

I read it and thought it's just too complicated

It's really a personal choice and an affordability issue, in an ideal world life, serious illness and income protection would be nice but obviously most people can't afford the lot so it depends on your attitude to risk and your priorities.

Who are you thinking of taking the salary protection cover on, just your wife or both? What sort of salary protection is it? the long term type or just something like repayment protector as you mention your wife suffering something debilitating at work being low risk? Income protection would usually be to cover most things that would stop you working long term, not just something that happened while at work. Maybe clarify what type of cover you are talking about there.

As 44B with the additional comment that you need to look very, very closely at what the income replacement cover will actually do.
The main points, include, but are not confined to:
what illnesses are covered/ not covered:? There will be exclusions and perhaps some wrinkles on pre-existing.
when does it click in? after 3, 6, X months
At what level: 30%......40%....etc
For how long: 3 months, 6 months etc...?

You have to ask the question, what do you think 30 a month will buy?

Likewise is the 16 month just on you or on both, you need both, IMO

Hi,

Thanks for the feedback.

So the €16/month is just to cover the mortgage in case of death and that covers both of us. Add an additional ~€30/month and the insurance company will pay out 50% of the value of the mortgage immediately (if either of us contract one of 22 specific terminal illnesses) but it also means that the death payout is reduced by 50%, so if you actually spend some of the money to treat the terminal illness you'll be out of pocket if looking to clear the mortgage on death.

I don't know if an extra 30/month is value but conversely I don't want to under-insure and I've not been able to find much discussion on the topic.

I think if we both stay on private healthcare, have good sick leave policies on our employment and build up some residual funds with the money we would be paying with the serious illness cover it's commensurate to the 50% serious illness cover.

1stimebuyer said:

I think if we both stay on private healthcare, have good sick leave policies on our employment and build up some residual funds with the money we would be paying with the serious illness cover it's commensurate to the 50% serious illness cover.

Click to expand...

Would broadly agree with this. Critical illness cover is generally very useful for those who are self-employed. Income protection has normally too many exclusions and in general is not worth the value of the associated premia!