Competition cuts cost of mortgage protection
Medical advances help to reduce insurance cover
FIERCE competition among life companies has sent the cost of mortgage protection policies down by as much as half, new research shows.
Some of the reductions are a result of medical advances and people living longer, which means life companies have to pay out less often.
But aggressive competition is the main reason that the cost of mortgage protection policies have collapsed, a survey by Caledonian Life shows.
Mortgage protection is a form of insurance specifically designed to protect a repayment mortgage.
If the policyholder dies while the insurance is in force, the policy pays a capital sum that will be just sufficient to repay the outstanding mortgage.
The sharp fall in the cost of these policies means that homeowners can make massive savings by cancelling their existing policy and taking out a new one.
A 35-year-old male non-smoker can now get €300,000 worth of cover for €24 a month. This is down from €40 a month in 2001. Greg Dyer of Caledonian Life said couples with young children were the most likely to switch mortgage protection insurance provider to make a saving.
"Caledonian Life's own research suggests that over the last 10 years, premiums have reduced by anything between 16pc and 49pc.
"While some of these reductions could be attributed to medical advances and an increased life expectancy, aggressive competition within the market, particularly in the last four to five years, accounts for most of the cuts."
The EU gender directive, which became law last Christmas, makes it illegal for insurers to discriminate between men and women when it comes to insurance premiums. This means that the cost of mortgage protection has fallen for men.
Mr Dyer added: "As a result of the gender directive, many men are also looking at a further reduction in the cost they could now potentially pay for their policy. So the opportunity exists for these customers to reduce their monthly premiums."