Decreasing term cover that tracks the falling mortgage balance.
Sum assured at start
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Balance at year 5
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Balance at year 10
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Balance at year 15
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Your breakdown
Updates live as you type| Point in term | Outstanding balance |
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The cover the bank insists on
Mortgage protection is a life insurance policy whose only job is to clear your home loan if you die before it is paid off. Under the Consumer Credit Act, Irish lenders require it on a principal private residence before they release the funds, with narrow exemptions for older borrowers, those who cannot get cover for health reasons, or people who already hold suitable life cover. It is deliberately bare-bones and cheap compared with ordinary life insurance, because the sum assured is tied to a debt that shrinks every year rather than a fixed lump sum for your family to spend as they wish.
Why the sum assured falls every year
This is a decreasing term policy, and the word decreasing is the whole point. At the start of a €300,000 mortgage you need €300,000 of cover, because that is what is owed. By year ten you have repaid a chunk of capital, so the outstanding balance, and therefore the cover you need, is lower. The insurer matches the falling sum assured to the expected mortgage balance, which is why the premium stays level and modest while the payout figure drifts down. This tool runs a standard amortisation schedule on your loan and reads off the outstanding balance at years five, ten and fifteen, so you can see the cover tracking the debt.
Tracking €300,000 down over 25 years
For a €300,000 mortgage at 4 percent over 25 years, the balance, and the cover needed, falls like this.
Notice how slowly the balance falls in the early years and how it accelerates later. That is amortisation: early payments are mostly interest, so cover stays high for a good while before dropping away.
Joint, single, and the gaps people miss
A joint life policy covers two borrowers but pays out only once, on the first death, clearing the mortgage at that point. That is fine for the loan, but it leaves the surviving partner with no cover for any other need, which is why many couples add separate life insurance on top. A single life policy covers one borrower only. The common and costly mistake is treating mortgage protection as family protection. It clears the house and nothing more. If you have children or other dependants who would need income beyond a paid-off home, a separate life insurance needs assessment is the right next step. One more tip: shop the policy around rather than taking the bank’s offered cover, because the lender cannot force you to buy their product, only to hold adequate cover.
Two practical points round this out. First, the figures here assume a standard repayment mortgage where the balance falls in a smooth curve. If part of your loan is interest-only, the balance on that portion does not fall, so a level term policy may suit it better than a decreasing one, and you should tell the insurer. Second, mortgage protection is not the same as mortgage payment protection insurance, which covers your monthly repayments if you lose your job or cannot work through illness. The two are often confused at the point of sale. This tool is concerned only with the life cover that clears the loan on death.
Can I keep the policy if I switch lender?
Yes. The policy belongs to you, not the bank. When you switch mortgage you simply assign the existing mortgage protection to the new lender, assuming the cover amount and term still match the loan. That avoids buying a fresh policy at an older age, which would cost more.
What if my health makes cover expensive or impossible?
If you genuinely cannot obtain mortgage protection at a reasonable cost because of a medical condition, the Consumer Credit Act provides an exemption, and lenders can proceed without it in those circumstances. There are also specialist insurers and Designated Activity arrangements for people declined elsewhere. Disclose your health fully, because a non-disclosure can void a claim.