Naas Insurance What is Mortgage Protection?

A Mortgage Protection plan is essentially a decreasing Life Assurance plan. The policy is taken out for a sum equal to the outstanding balance on a Mortgage and the policy is designed to run for the remaining term of the loan you have taken out.

Premium stays the same for the full term, however rates are discounted, as the cover will reduce each year.

An Example would be:

Loan of €100,000 for 20 years.

A mortgage protection policy with a 20 year term, and initial sum insured of €100,000 would be taken out. An average interest rate over the term is assumed and the premium is based on this rate.

The policy can be taken out on one person's life or two persons' lives (called a joint Life). The benefit (i.e. what you are covered for) will be then paid out in the event of death (of any of the lives covered) prior to the expiry of the policy term. As the benefit is decreasing in line with the Mortgage repayments it is important to note that this policy could shortfall in the event that interest rates increased significantly over the term of the mortgage. The policy can also be arranged to include critical illness cover, usually considerably more expensive, which would clear the outstanding balance in the event of diagnosis of specified critical illnesses during the term of the mortgage.