Mortgage Protection is a form of life insurance and in most situations is obligatory when someone is getting a mortgage to buy a home for themselves. At a minimum, the borrower(s) must be covered for Mortgage Protection for the amount and term of the mortgage. You say that the house is valued at €260,000. Presumably your family member is borrowing less than this. It's the amount they're borrowing that's relevant here. So if, for example, they're borrowing €230,000 over 25 years, then they must be covered so that in the event of their death in the next 25 years, the outstanding balance of the loan is paid off. The requirement is therefore reducing as they're paying down the loan over time. A Mortgage Protection life insurance policy is designed so that the cover is also reducing in a broadly similar fashion to the reduction in what they owe. So if they died at some point in the future when they owed €100,000, then a Mortgage Protection policy should pay off €100,000 and so on.
To be clear - Mortgage Protection is just a type of life insurance policy.
There are many optional covers - level cover for the duration of the loan, illness cover etc. Each option costs extra and should be evaluated based on the needs of the person and their willingness/ability to pay extra for optional covers.
It will also be a requirement of the mortgage that the building itself is covered for at least the rebuilding cost, which will be determined by the mortgage valuation. The rebuilding cost is usually lower than the purchase price of the property itself. Contents insurance with the buildings insurance is optional but recommended.
I'm a broker and so my comments should be read taking my biased standpoint into consideration, but it's rarely a good idea to purchase the Mortgage Protection or House Insurance from your lender. Banks act as tied agents for life insurance companies - i.e. they can only sell you the products of one company. Bank of Ireland are tied to New Ireland Assurance and most of the others are tied to Irish Life. Your family member would be well advised to get the bank's best quotes and then shop around for their requirements and go with the ones offering the better deal. (In my experience, that's very rarely the bank.) It's illegal for a lender to make a mortgage offer conditional on the customer taking the insurances with the bank. And it's not easier or quicker to go with the bank for the insurances - the bank is only acting as an insurance sales agent and the customer still has to apply to the insurance company anyway.
Regards,
Liam
www.ferga.com