Mortgage Protection Insurance

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riverrushes

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I have an existing mortgage from 2008 20 years €110,000(BOI). I am in the latter stages of switching & refinancing with AIB giving me a 21 year loan of €100,000.
However AIB want me to extend my Mortgage Protection to 21 years. When I took out the original BOI mortgage i took out a Life Insurance policy (BOI "life care plan") costing €47 a month. It is for 113,000 and has critical illness cover of 50,000. I have built up €1,500 on the BOI "life care plan". I phoned the insurance providers today and asked them about extending the policy. The girl on the phone mentioned €70 - €80 monthly payments to me.
I was surprised at the amount she mentioned. Is this overpriced?
If i go onto bonkers.ie I get quoted mortgage protection for as little as €13. What is the difference between this and BOI life insurance policy?
 
Well your existing one has critical illness included and might be level cover whereas the bonkers one I presume is bog standard decreasing mortgage protection so not comparing like with like.

Any 'extending' of your existing policy is basically the same as applying for a new one based on your age now, the one you have is cheaper as obviously you took it out when you were 20 years younger.

Talk to an insurance broker maybe. You could also just keep on the existing policy and take out the cheap €13 pm one to cover the new mortgage.
 
Thanks Monbretia

Supposing i was to die next year and I had the €13 insurance. What difference would there be between that and the €80 insurance. Can the bank force me to go with their product as opposed to something online?
 
riverrushes said:
Can the bank force me to go with their product as opposed to something online?
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No. You can get your life cover anywhere.

riverrushes said:
Supposing i was to die next year and I had the €13 insurance. What difference would there be between that and the €80 insurance.
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If you die, nothing. Mortgage gets paid, and there might be a few quid left over.

But your existing policy would cover if you got certain specified illnesses (think illnesses where chance of survival are low). It sounds like your existing policy also has an encashment value if you cancel it.

It might be worth chatting to someone about your overall insurance needs and look at the right solution for your circumstances, for example if you have dependents.
 
If you died next year then as RedOnion says virtually no difference, however the original policy that you are considering increasing may be a level policy as well as having the serious illness cover.

If this is the case then there would be a big difference if you died say in year 19 of your new mortgage, the cheap policy would pay off whatever is owing on the mortgage at that stage which would be very little, the more expensive policy would pay out the original sum insured so a large surplus left for dependents.

However I would also check if your original policy that you want to extend is a reviewable one, if it is then chances are are time passes the amounts will be reviewed and the payments rise or the benefits decrease. This is important to check as it can end up becoming too expensive to keep on.

If you do intend to go for a similar policy to what you have you may as well shop around rather than attempt extending the existing one as you are going to be looking at new underwriting either way so any changes in health and obviously age will be taken into account. Life cover has gotten cheaper over the years but serious illness cover has become more expensive so you need to compare the benefits of keeping your existing policy if there is a term left on it as your own personal policy regardless of the bank and just giving them the cheapy one that covers than rather than taking out a new policy similar to your original at the higher cost.
 
Monbretia said:
However I would also check if your original policy that you want to extend is a reviewable one, if it is then chances are are time passes the amounts will be reviewed and the payments rise or the benefits decrease. This is important to check as it can end up becoming too expensive to keep on.
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If the Life Care plan has a cash value, it most likely is one of these awful reviewable premium policies alright. I have despised these with a vengeance for years. Instead of paying a fixed cost for the insurance cover that you need, you pay a premium which is split between paying for your insurance and building up a "fund" - currently around €1,500 in this example. But out of the €47 per month that you're paying, the internal split between what's going out on insurance and what's going into your fund is changing as you get older, with the cost of the insurance getting higher and the amount going into your fund getting smaller. It is possible that the cost of life cover will exceed €47 per month. Then the policy can perform one of its lovely tricks - eating itself. It can start cannibalising the fund part.

As has been said above, there are usually "review" clauses on these policies which will make them more expensive as you get older. The reviews get more frequent as you get older also.

I used to have a blog some years ago and I wrote about these types of policies over seven years ago. http://fergablog.blogspot.ie/2011/02/reviewable-me-whole-of-life.html My opinion hasn't changed one bit since then.

Unless you're now in poor health and would have difficulty getting a new policy, I'd advise that you ditch this policy immediately and replace it with a simple fixed-cost one. If you could potentially afford the €70 per month premium that was suggested, open a savings account and save the difference. Start it off with the €1,500.

Regards,

Liam
https://ferga.com/
 
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