Mortgage Protection Insurance or Life Insurance?

S

sawcebox

Registered User
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Hi all,

My husband and I have been approved in principle for a mortgage and are getting all our ducks in a row to hopefully buy once we can view houses properly. We've been quoted prices for Mortgage Protection as well as Life Insurance, and also Life and Serious Illness Protection Cover, and we don't know what to do. Obviously the bare minimum to get the mortgage would be the Mortgage Protection, and that is a very small amount per month (approx 20 euro) compared to the others (up to 80 euro, for the bells and whistles), but life and serious illness insurance is something we would like to consider at some point.

Our details:
Me: early 40s, low earner (currently on PUP due to pandemic, but low earner even in normal times)
Him: late 40s (50 next year), high earner
No children or plans for children, no debts other than the potential mortgage (of approx 100,000, 15-year fixed term), both good health, non-smokers, etc. Decent savings.
Hope is for Husband to retire early or transition to a lower-paying job in a few years as his job is quite stressful. I would be unlikely to ever become a high earner, given my chosen profession. Thus a very large monthly payment for life insurance might become unsustainable.

I am lost. Everyone's situation is different of course, but there doesn't seem to be any general advice in an Irish context on what kind of insurance is best for different stages of life, other than from insurance brokers.

What would you do? I am leaning towards getting the bare minimum mortgage protection and taking our time later on to properly research other kinds of insurance, maybe consult a financial advisor, but am I wrong? Should we just sort this out now? (It's also just incredibly confusing; neither of us have ever had to get any kind of life or illness insurance before, and even comparing between two policies that seem similar is baffling.)

Thank you!
 
If you think you might be trading up in future, get Life Cover now sufficient to cover that up until you are 65.
As you may not be able to get cover in 10 years time due to accumulated health issues.

Otherwise, at a basic level Mortgage Protection may be enough i.e. where the amount reduces over the term of the mortgage to cover the remaining amount.
Against that, should the worst happen, if your husband does not have death in service benefit it might be prudent to consider Life Cover regardless.
i.e. would your income alone be enough to cover the bills (except the mortgage which would have been cleared)
 
Hi

In 2012 when through this process and thought we buying our forever home but now in process of trading up so will have to get a new life cover to cover the new term and life insurance will be more expensive now that we both 9 years older.

So as above get the broker ( Bonkers.ie have an online calc for guide no link to them) to run the numbers.

If I could advise my 2012 self

Take it for the Longer-term to 70 to 80 years old.
Take it for a larger sum ( the balance from the mortgage goes to the estate) for any possible house moves in the future.

Dual life policy for couple euro more a month for us it was only a euro. the policy will pay out double the amount if both parties die ( might be a moot point if no children) but for the price.

If cost is an issue take possible two polices one mortgage and a much smaller life policy. If cost becomes an issue in future you can cancel life policy
 
sawcebox said:
I am lost. Everyone's situation is different of course, but there doesn't seem to be any general advice in an Irish context on what kind of insurance is best for different stages of life, other than from insurance brokers.
Click to expand...

In your situation, I would go for the mortgage protection only now to get your mortgage sorted and then take time to consider what else you actually need.

In my opinion, life insurance works best for a family, particularly a young family. The idea being that if you were unfortunate enough to lose a spouse, the mortgage would be cleared and there would be an additional cash sum to allow the surviving spouse to raise their children without a huge financial burden. For example, they could take unpaid leave until such time that kids were in school and childcare costs are not as significant before returning to work. In your case, if one of you were to die, the other could continue working and supporting themselves quiet easily so I don't think life insurance and a large payout is a priority for you. The mortgage protection would leave you in a comfortable financial position if the worst was to happen

What you are probably under-insured for is if your spouse (the high earner) is unable to work. That would be a difficult situation for you. Two people trying to survive on a single low income and pay the mortgage at the same time. You can protect against this with serious illness cover or income protection. But it is worth bearing in mind that there are a lot of scenarios where you are unable to work that do not involve any of the specified conditions covered in most serious illness policies.

It is probably a good idea for you to consider income protection for your spouse. The premiums will look high on first glance but IP premiums qualify for tax relief so they are not as bad as first imagined
 
Take out mortgage protection for the house and nothing more. That will be assigned to the bank and if there is a claim, the proceeds will be paid to them first. So if you have specified illness and one of you gets cancer, the bank will receive the specified illness pay out, even if you would prefer to use the money elsewhere. Just take out separate cover for yourselves. As your husband is the main earner, he needs a lot more cover than you. Take it out until when you intend to retire as you should have built up wealth in pension funds by that stage and don't need any life cover.


Steven
www.bluewaterfp.ie
 
Hi all,

I'm glad someone created a thread on this as I was just about to look into mortgage protection v Life cover.

My details are as follows:

  • Joint mortgage (spouse and I) for past 10 years.
  • 25 years remaining on mortgage which is approx €300K remaining on loan
  • Both spouse and I are aged late 30s
  • Two children aged under 5
  • I am employed and spouse s a stay at home mother for the moment
  • My employer has a death in service benefit
  • Have mortgage protection cover with Aviva for past 10 years when we initially took out the mortgage. We have never reviewed the details or compared premiums with other providers.
Any advice and pro and cons on whether we should consider taking out a life policy now rather than just the mortgage protection? I admit I know little about the difference and as I say I already have a death in service benefit with my employer.

Thanks
 
_OkGo_ said:
What you are probably under-insured for is if your spouse (the high earner) is unable to work. That would be a difficult situation for you. Two people trying to survive on a single low income and pay the mortgage at the same time. You can protect against this with serious illness cover or income protection.
Click to expand...
I fully agree. This is the big risk here.


The OP is being offered a range of products and can't decide. It's back to front. She should look at what her needs are and then pick a product.

I would prioritise:
  1. Income protection for higher-earning spouse. They would have trouble if he couldn't work.
  2. Mortgage protection (cover that declines with balance of mortgage). If either dies they want a mortgage-free property.
  3. Life cover until retirement age, with husband insured for more than wife, as his loss would be more difficult financially.
 
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