Mortgage Protection Policy

Discussion in 'Mortgages and buying and selling homes' started by laura28, Apr 11, 2017.

  1. laura28

    laura28 Frequent Poster

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    78
    Hello,

    Looking for some advise/recommendations on mortgage protection. We are currently trading up and getting a new larger mortgage. Our current policy is with Eagle Star, it is €160 per annum and I have no idea what is covered.
    We are a couple approaching our 40s with 2 young children - what kind of policy should we be looking for? Both in good health, thank god! I am public sector so have decent salary coverage if I get ill and a good pension, my husband has a private pension scheme and I am unsure of his cover if out ill.

    I have no idea where to start with this & would appreciate any advice or guidance.

    Thanks
     
  2. Aodhán

    Aodhán Frequent Poster

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    I'm interested in hearing the answer to this, too. More specifically, are there any mortgage protection policies or companies that do not show up on the software used by brokers? (e.g. not all mortgage providers show up in the so-called "best rates" which mortgage brokers look at as some banks do not deal with brokers)
     
  3. aristotle

    aristotle Frequent Poster

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    Mortgage Protection policy is there to cover the outstanding mortgage so you age\children isn't relevant. Your age, whether your smoke etc is relevant to the premium you pay for the policy.

    So just get some quotes for the new larger mortgage and the length of the term. One broker I use a lot is LaBrokers.ie - I find they are competitive.
     
  4. laura28

    laura28 Frequent Poster

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    Thanks for that. I am presuming that all the other add ons that they will try and sell us regarding income/serious illness cover are not essential...
     
  5. SBarrett

    SBarrett Frequent Poster

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    If you just want cover to meet the banks requirement, mortgage protection/ reducing term cover is what you want. It assumes an interest rate of 6% and the cover reduces accordingly over the term, until it is zero at the end. It is the cheapest you can get. Level term (the cover stays the same) will be a bit more expensive, critical illness will be quite expensive.

    Aodhán, as far as I am aware, Acorn Life are the only life company that don't show up on the pricing sites that we use. Most banks use Irish Life, except Bank of Ireland who use Bank of Ireland Life. They have the same price as New Ireland, who are also owned by Bank of Ireland.


    Steven
    www.bluewaterfp.ie
     
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  6. Aodhán

    Aodhán Frequent Poster

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    Thanks, Steven. That was very helpful. I was reading the Consumerhelp website and they say that if you buy mortgage protection from your lender and then want to switch lenders a few years down the road they will cancel that protection and 'This means that you will have to buy new mortgage protection insurance when you move your mortgage and the older you are, the more it will cost you. If your health has dis-improved since you took out your mortgage, you may not be able to get new mortgage protection cover.'

    BofI is our lender so I think that will ensure we don't choose mortgage protection with them. Furthermore, I see the person in the first post was paying €160 per annum. We've just been quoted, for reducing cover mortgage protection, €80 per month. Per month. That seems like a ridiculous amount. It's a 27-year mortgage for a 44-year-old and a 38-year-old. Our interest rate is 3% fixed for 3 years or 3.2% fixed for 5 years (we're trying to get the latter down to 3.1% before we decide). That's about 4% APRC, a far cry from justifying a 6% assumption. Should we be expecting to pay this much per month?
     
  7. Aodhán

    Aodhán Frequent Poster

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    I just got a quote from Acorn and they said their 'mortgage protection' reducing cover policy doesn't cover more than €400k (presumably when he inputed our dates of birth). He then tried to sell me another policy but I had to stop him as I'm currently worth far more dead than alive when it comes to policies. At any rate, for 400k over 27 years he quoted a cost of €89.41 per month. It doesn't look like the brokers are missing much of a deal by not having Acorn on their system
     
  8. laura28

    laura28 Frequent Poster

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    I got a quote through LAbrokes there and it's looking at approx. €40 per month for the bog standard cover. I guess we are 10 years older than when we initially got cover. Our mortgage is with AIB and will remain with them so I might contact Eagle Star to see can we get a better deal from them....
     
  9. SBarrett

    SBarrett Frequent Poster

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    What you read on the consumerhelp website is the old block policies where the cover was almost treated like a group risk scheme. I've always been independent so I am not overly familiar with them. I don't think they are that common anymore.

    Laura was paying €160 a year but you don't know the level of cover or her age at the time. Cover is based on age, term, amount of cover and whether you smoke. If you let me know the amount of cover and smoker status I can run a quote for you.

    You don't have a choice on the 6%. Banks won't accept mortgage protection cover with a lower interest assumption rate. You are talking cents in the difference in price. And think of the consequences of you going with 4% cover and rates going up to 6%. The life cover is reducing at a faster rate than your actual mortgage. You die, your policy pays off most of the mortgage but not all of it and the bank is after your wife for the outstanding balance. All over less than €1 a month?! You have 27 years left on your mortgage, there's a good chance rates will be up about that level in that time.

    LABrokers do execution only, online cover. It is a cheap as you will get. Zurich Life (they changed from Eagle Star years ago!) won't be able to do any better.

    Going direct to the insurance company. You end up dealing with someone in direct sales who works on a commission basis.

    Steven
    www.bluewaterfp.ie
     
  10. demoivre

    demoivre Frequent Poster

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  11. dvpower

    dvpower Registered User

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    I have a Mortgage Protection policy taken out years ago with BoI.
    One thing I'm unsure about is that the cover amount is about twice that of the outstanding mortgage.

    Does that sound right? It's a joint mortgage, so maybe we're each covered for the mortgage amount and that explains it?
     
  12. SBarrett

    SBarrett Frequent Poster

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    It could be due to low interest rates. The mortgage protection policy assumes 6% interest but the reality has been a lot less. Joint life means 2 people cover, pays out on first death.

    Read previous posts on how mortgage protection works. It doesn't actually track the exact outstanding amount.


    Steven
    www.bluewaterfp.ie
     
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  13. Delboy

    Delboy Frequent Poster

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  14. dvpower

    dvpower Registered User

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    Thanks. My mortgage is a tracker, so I can understand that the coverage amount hasn't been decreasing as fast as the actual outstanding mortgage.
    So I guess my question now is, should I contact my bank and ask them to reduce my cover?, because I guess my premium would be lower if my coverage amount was somewhat in line with the outstanding mortgage. I don't suppose the bank would pay out more than the amount of the outstanding mortgage in the event of a claim.
     
  15. Monbretia

    Monbretia Frequent Poster

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    The insurance company pay out in the event of a claim, not the bank, and they will pay whatever the amount insured is at that time so if it's higher than the mortgage then the balance goes to your estate.
     
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