Premiums for life insurance have reduced dramatically
Usually when it comes to insurance products, prices only go one way - up. That makes shaving off extra costs difficult as you're simply running to stand still each year.
However, there is one product where premiums have reduced dramatically and that's life insurance, especially when linked to pay off your mortgage.
As we all live longer, healthier lives these days, the cost of insuring someone has dropped from 10 or 20 years ago, so if you're still paying high premiums on your mortgage protection cover, especially if you bought it from your bank directly, it's a no-brainer to switch to a better-performing, cheaper product which does exactly the same job.
There are lots of different types, but let's stick to the basics: decreasing term assurance (DTA). This starts out high, just like your mortgage, but the cover reduces over the years, meaning if you or your spouse died, the sum insured would be just enough to go directly to the bank to clear the loan. This is why lenders insist on it (and having the policy legally assigned to them), before giving you a mortgage.
But 'legacy' products were often sold in the past, designed to do other jobs - provide extra cover, over and above, or even to have increasing cover. While there's nothing wrong with this, you're best off keeping your personal life insurance separate from that covering your mortgage.
Karen Gallagher of Aviva Insurance says many mortgage holders are under the 'misconception' that they are obliged to purchase mortgage protection from their bank or lender. "While signing up to the lender's product can seem like a convenient option, it is worth your while shopping around either at the time or subsequently. Sometimes, mortgage protection offered by lenders can be more expensive when compared with similar products available across all providers in the market."
While mortgage protection is the cheapest option, some people have in the past taken out 'Whole of Life' policies which they are still paying. "It is a more expensive product as the premiums are calculated to cover for the mortgage amount over the person's entire life, so cover does not decrease and often policies have to be reviewed to ensure that they do last for a person's lifetime. It is well worth asking a financial broker what type of cover you have, as you could make savings by changing or switching," adds Ms Gallagher.
The prices may surprise you.
For a 30-year-old non-smoker, with €200,000 left to run on a loan over 15 years, DTA cover would cost just €10 per month. Even for a 50-year-old it's just €29.86 with Aviva, although most insurers price-match for this type of product anyway. You can add in your spouse for very little extra or nothing, as there's only one payout in the event of either of you passing away.
If this is more than you're currently paying, it pays to switch in 2019.
Due to the nature of the product there are some caveats though: firstly, get a quote from a broker to make sure it's the right product for you.
Then, ensure it is in place before the existing policy is cancelled so there is no break in cover, and your bank will insist on an 'assignment' of it - that's transfer of the legal ownership, which is just a form to fill, to complete the process.
"Once that's done, you can consider extra cover like payouts for specified illnesses, accidents or replacing your income if you fall ill," says Ms Gallagher.
"Prolonged periods off work for treatment and recovery could put a strain on your ability to meet your financial commitments. This could put your home and lifestyle at risk if you can't keep up with your mortgage and other payments. Income protection is an insurance policy that pays a regular income to a policyholder who is incapacitated following illness or accident and is unable to work at their own occupation. The policy usually pays out a percentage of the policyholder's normal earnings, less any State benefits payable.
"Serious illness is an insurance product in which the insurer makes a lump sum cash payment if the policyholder is diagnosed with one of a long list of specific illnesses. Serious illnesses such as cancer and heart disease affect families every day and getting access to treatment and funding lifestyle changes is not cheap. These payments help families deal with these expenses."
These products are more expensive than life insurance, so make sure you shop around. There may also be medical questions and exams.
How to switch... mortgage protection
Step 1 Find out what you still owe on your mortgage and the remaining term from your bank.
Step 2 Get a quote from a financial broker for decreasing term assurance (DTA).
Step 3 Complete the health questionnaire and put the new policy in place.
Step 4 Cancel the old policy (there may be a month's overlap).
Potential savings: €7,200 on €50pm policy
Total time: 1 week