Funny you should mention that! My wife and I took out one of those 4 years ago when we were looking at getting a mortgage. I have to admit that we were totally financially naive at the time. We didn't shop around and accepted the advice and quotes we were given from their mortgage and life assurance sales people. Four years and two kids later and we're in the middle of a major financial spring cleaning (for which this site has proven invaluable, hats off to all concerned).
As part of the spring-clean, I went to have a chat with the BOI life assurance guy yesterday, to get him to do what his predecessor had failed to do for us 4 years ago (maybe not entirely her fault - as I said, we were naive), which was explain in plain English what our policy actually covered us for. In fairness to him, he did a decent job of explaining what was what (considering he is basically a salesman).
So, your bare minimum mortgage protection insurance only covers the amount outstanding on your loan. If you die, the bank gets their money, end of story. As the amount outstanding diminishes, so does your premium. Now, with our Flexi-Life thing, the premium doesn't diminish (in fact mine increases annually in line with inflation) so that as the loan balance diminishes, we have a bigger and bigger "bit left over" on our policy. In this case, if one of us dies, the bank gets their money and the survivor gets the leftovers.
On top of this aspect, we appear to have critical illness cover and as I already mentioned, index-linking, all of which add up to a much more expensive monthly outgoing than a basic mortgage protection policy. There has been much debate on the benefits/drawbacks of this kind of "extra".
There are also other "value-added" (i.e. more expensive) features in the policy: it has a surrender value (if I cancel the policy now I get a few hundred quid back); it's flexible (I can change the level of critical illness cover / life assurance cover easily, or so I'm told).
Please note I'm not saying all these justify the extra cost, I'm just reporting the sales pitch.
After I ran through all this with the BOI guy, he took note of our current economic situation and fed the details into a program on his laptop, and surprise, surprise, it told me I should increase my cover significantly now that we have children.
So my next step is to examine what would happen to us financially if my wife or I died or got seriously ill, and then estimate what level of cover we would need to deal with those situations. We may or may not drop the critical illness cover, for example. Then I'll shop around for quotes for that level of cover and see what I can find. The thing is, on one hand I'm trying to mitigate risk, and on the other hand I'm trying to reduce monthly spend. I need to find a sane balance with acceptable risk and acceptable expense.
I'm all for making sure my family are protected against financial trouble, but I definitely no longer blindly accept whatever numbers are dangled in front of me by a person in a suit. Maybe Flexi-Life is what I need, maybe it's not - we'll see soon.
Hope I've at least partially answered your question.