# Life cover if mortgage is paid off early



## random10 (1 Apr 2015)

We took out a 30 year mortgage with BOI last year. We took out life cover which costs €43.43 per month. This covers the 265k mortgage which will be paid off if either myself or husband dies. Also we will get a lump sum on death balance left on mortgage. So for example in ten years if we still owe200k of mortgage the 200k will be paid off and surviving spouse gets 65k. This has got me thinking recently. This cover is linked to our mortgage so if we pay off our mortgage early as I would hope to do life cover will be gone am I right. So if we paid mortgage off in 23 years and one of us died in 25 years we would get nothing. So is the best option to pay as much as we can now but leave term 30 years so in the last few years just pay a few hundred a month to keep our life cover?


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## Brendan Burgess (1 Apr 2015)

The life cover is completely separate. 

If you pay off your mortgage early, the cover continues. (Likewise, people who reschedule their mortgage are often required to increase their mortgage cover.) 

You should assess whether you still need the cover. 

If you did not have the cover, would you buy it? 

Brendan


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## Monbretia (1 Apr 2015)

Sounds like you have a level amount fixed term policy rather than the more common reducing one with a mortgage.  Amount will be paid out if you have a valid claim regardless of what's owing on mortgage.


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## random10 (1 Apr 2015)

So if I've paid mortgage off its not linked and I'll get a lump sum of 265k if spouse dies?


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## Redone (1 Apr 2015)

Erm, yes... Now don't be cutting any brake lines


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## random10 (1 Apr 2015)

Ha ha we've always said we're worth more to each other dead than alive. Bank of Ireland sold us the life cover and I thought it was linked to mortgage and that when mortgage was paid it was finished with too.


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## Monbretia (1 Apr 2015)

It might be linked to it in that it is assigned to BofI so that if there is a claim they get first claim on the funds to clear off what's owing.  If you do clear the mortgage early just make sure the policy is not cancelled as part of the process if you still want to keep the policy going.


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## Monbretia (1 Apr 2015)

Might also be worth your while shopping around to check if that level of cover at that price is as good as you can get assuming there has been no changes in health since.


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## Steven Barrett (2 Apr 2015)

random10 said:


> Bank of Ireland sold us the life cover and I thought it was linked to mortgage and that when mortgage was paid it was finished with too.



Reading the original post I was fairly certain that the bank sold you that policy. It's a trick they use to get you to pay higher premiums. When you get a capital & interest mortgage, a reducing term policy is by far the cheapest. It assumes a mortgage interest rate of 6% and the level of cover reduces as if you were paying a mortgage with 6% interest. At the end of the policy, the life cover is zero, just like your mortgage. 

Steven
www.bluewaterfp.ie


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## Monbretia (2 Apr 2015)

I sold a lot of insurance with mortgages and I never considered level term cover a trick, it was often not much more expensive than decreasing and at least if the worst happened there was hopefully a surplus few bob for the survivor.  Often new mortgage holders haven't the money to take out a second level policy so at least this is at least a step up from basic decreasing cover or that was my thinking on it anyway


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## Gerry Canning (2 Apr 2015)

Monbretia said:


> I sold a lot of insurance with mortgages and I never considered level term cover a trick, it was often not much more expensive than decreasing and at least if the worst happened there was hopefully a surplus few bob for the survivor.  Often new mortgage holders haven't the money to take out a second level policy so at least this is at least a step up from basic decreasing cover or that was my thinking on it anyway


......................
Point taken and good advice.
Problem is that customer did not understand your good intentions.

Sadly ,too many of your colleagues were not so customer centric!


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## Monbretia (2 Apr 2015)

I can guarantee you my customers certainly did understand or maybe I should rephrase that, it was well explained to them at the time but I always found people wanting a house saw all the bank/mortgage/insurance stuff as an irritating side effect of the process of getting their house


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## random10 (2 Apr 2015)

SBarrett said:


> Reading the original post I was fairly certain that the bank sold you that policy. It's a trick they use to get you to pay higher premiums. When you get a capital & interest mortgage, a reducing term policy is by far the cheapest. It assumes a mortgage interest rate of 6% and the level of cover reduces as if you were paying a mortgage with 6% interest. At the end of the policy, the life cover is zero, just like your mortgage.
> 
> Steven
> www.bluewaterfp.ie



So you're telling me it probably is linked to mortgage then? And when mortgage is paid life cover is gone? Should I change to a life cover that isn't linked to mortgage?


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## Monbretia (2 Apr 2015)

No it's probably linked to the mortgage in that the bank has first call on it if there is a claim (assigned to bank) but that doesn't mean it disappears if the mortgage is cleared off, it just means there was no claim on it so it remains while you continue to pay the monthly premium.

You say the amount remains the same throughout the term, therefore it isn't a decreasing policy that goes down over the years together with the mortgage, they are the only type that are at zero when the mortgage is finished, although if a person did clear off a mortgage early the decreasing policy could also still remain in place and the amount of a claim would decrease over the years to match what the mortgage balance would have been.  However I would not continue on a decreasing policy on after the mortgage was paid off early but I would keep on a level one like you have.


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## Steven Barrett (2 Apr 2015)

random10 said:


> So you're telling me it probably is linked to mortgage then? And when mortgage is paid life cover is gone? Should I change to a life cover that isn't linked to mortgage?



No, I am explaining how a "mortgage protection" policy works. Monbretia has explained all perfectly. 


Steven
www.bluewaterfp.ie


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