Mortgage protection in Northern Ireland: do I need it?

Mortgage protection is life insurance designed to pay off your mortgage if you die before it’s repaid, so your family can stay in the home. It’s usually decreasing term cover, where the amount of cover falls roughly in line with your repayment mortgage, which makes it one of the cheapest types of life insurance. You don’t legally need it to get a mortgage, but if anyone relies on you to help pay the mortgage, it’s one of the first things to put in place.

This guide explains how mortgage protection works in Northern Ireland, the options available, and the mistakes to avoid.

How does mortgage protection work?

You take out a policy for the amount of your mortgage and for the same term. If you die during the term, the policy pays out a lump sum to clear what’s left of the mortgage. With decreasing cover, the payout falls over time as your mortgage balance goes down, so you’re not paying for more cover than you need.

Because of this, decreasing cover usually costs less than level cover. The interest rate assumed by the policy matters: if your mortgage rate is much higher than the rate the policy assumes, your balance may fall more slowly than the cover, so we check that the two match.

Is mortgage protection a legal requirement in Northern Ireland?

No. Neither the law nor most lenders require you to have life insurance to get a mortgage. But your home is likely to be the biggest debt your family would be left with, and without cover your partner or family might have to keep up the payments on one income, or sell.

Decreasing or level cover?

• Decreasing cover suits a repayment mortgage. It’s the cheapest way to make sure the mortgage would be cleared.
• Level cover stays the same for the whole term. It suits an interest-only mortgage, where the balance doesn’t fall, and on a repayment mortgage it would leave money over for your family once the mortgage was cleared.

Many families combine the two: decreasing cover for the mortgage and a smaller level or family income policy for living costs. Our guide to how much life insurance you need explains how to work out the full figure.

Should I add critical illness cover?

Mortgage protection only pays out if you die. Adding critical illness cover means the policy can also pay off the mortgage if you’re diagnosed with a serious illness such as cancer, a heart attack or a stroke. That can make a huge difference if you survive but can’t work for a long time. It costs more, so we’ll show you the price of both options.

Mortgage protection mistakes to avoid

• Not updating cover after a remortgage. If you borrow more or extend your term, your cover may no longer match.
• Assuming a joint policy is always best. A joint policy pays out once and then ends, leaving the surviving partner without cover. Two single policies cost a little more but each carries on.
• Not writing the policy in trust. A trust can get the money to the right people more quickly.
• Not disclosing health information fully. This is the most common reason claims are declined.
• Forgetting about illness and injury. Mortgage protection won’t help if you’re alive but can’t work. Look at income protection or our guide to mortgage payment protection for that.

Questions people ask

What our clients say

“Excellent throughout the process of arranging our life insurance. Highly recommended to anyone looking for honest advice from genuine people.”

Trustpilot review

Read more from our clients on Trustpilot and Google.

How McDowell can help

We’re a Northern Ireland based mortgage and protection adviser with over 30 years’ experience. Because we arrange mortgages too, we’ll make sure your cover matches your mortgage amount, term and rate, and compare insurers to find the right policy. Find out more on our life insurance page, or book a free call below.

Life insurance has no cash value unless a valid claim is made. Cover is subject to the insurer’s acceptance and terms. Your home may be repossessed if you do not keep up repayments on your mortgage.

This article is general information only and isn't personal advice. Mortgage and protection products depend on your circumstances, so please speak to one of our advisers before making a decision.