One of the questions we regularly get asked is, what is the difference between Life Assurance and Mortgage Protection?
In today’s blog Rob O’Neill QFA gives a brief explanation of the difference between the two and example costs.
Mortgage Protection
Mortgage Protection insurance is a life insurance policy designed to pay off your mortgage if you die during the term. It runs for the same length of time as your mortgage and it is aimed at reducing in line with your mortgage.
For example if you take out a €300,000 mortgage over 35 Years, the lender will require you to take out a Mortgage Protection policy that covers you for €300,000 and the amount of cover reduces down each year as you pay back the mortgage .
A sample cost for a similar type policy would be as follows –
- Husband and Wife age 30, Non – Smokers
- Mortgage of €250,000
- Term – 35 years
- Cost of Mortgage Protection is €24.78 per month
Life Assurance
Life Assurance policies pay a lump sum to a person you name (for example, your spouse or dependants) if you die during the term of the policy. Term Life Insurance is the simplest and one of the cheapest forms of life insurance.
For example, you might take out a Term Life assurance policy on your own life for €200,000 over 20 years. This means if you die within 20 years (the term), the policy pays out €200,000 to your dependants. If you don’t die within the term of the policy, no benefit is paid out and the policy ends. Unlike Mortgage Protection the benefit paid out remains the exact same throughout the life of the policy. The proceeds of these policies are generally used to help the family / spouse survive financially.
A sample cost for a similar type policy would be as follows –
- Husband and Wife age 30 Non – Smokers
- Mortgage of €250,000
- Term – 35 years
- Cost of Mortgage Protection is €37.91 per month
Both of the above type of policies can contain conversion options which lets you convert your policy into a new policy before the end of the term of the policy. The new premium will be based on the age you are then but significantly based on your health now. This means you can guarantee yourself some form of cover when you are older based on a slightly higher premium now.
If you are interested in finding out more about any of the insurance policies or looking to have one issued, please contact MC Financial. One of our Qualified Financial Advisors would be happy to organise a confidential consultation at your convenience. Please call our office on 01-8228022 or you can also reach us by email info@mcfinancial.ie
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Warning: Figures are of examples only. Personal details may cause figures to differ from case to case.
