Apply well in advance and clear the paperwork

Property buyers can apply for mortgage protection before they finalise a closing date for their loan and tell the insurer that the start date for the policy is not yet confirmed.

Mr John Geraghty, chief executive of online intermediary LABrokers.ie, says people should apply as early as possible, but probably not more than two months before their anticipated closing date.

"The advantage is that all the paperwork is out of the way," he says.

Mortgage protection, also known as decreasing term assurance, covers a sum that decreases in line with mortgage repayments so that it equals the value of the outstanding balance. The term of the mortgage protection policy equals the term of the mortgage.

The table opposite, supplied by LA Brokers, shows the monthly cost of mortgage protection premiums for a non-smoking couple with a mortgage of €250,000 that they are paying off over 25 years.

The premiums stay the same over the policy term. The younger people are when they first take out a policy, the cheaper it will be.

The premiums shown are the most competitive ones available for the different age groups. Borrowers are not required to take out the mortgage protection policy the lender offers them and can shop around the market themselves.

As the average mortgage has risen in line with property prices, mortgage protection policies now cover a greater amount than ever before.

But the cost of this added cover is partly offset by the fact that life assurance premiums have decreased on average over the past decade.

According to Mr Geraghty, people frequently ask why, if their cover is going down over the mortgage term, their premiums are not going down too.

The premiums are calculated by working out the average cost to the life assurer if something happens to the policyholder at any point during the term.

Those who make once-off lump sum overpayments to their mortgages may find it difficult to adjust their mortgage protection policy premiums downwards to reflect the lower cover needed.

For example, someone who originally had a mortgage for €200,000 and who has been steadily making monthly repayments inherits €20,000 and pays off part of the mortgage.

He/she might not think the premiums should be based on €200,000 cover any more, but very few policies will give the flexibility to base premiums on a €180,000 mortgage.

Instead, homeowners can save if they finish paying off their mortgages early: at this point there is no onus on them to keep their mortgage protection policies.

The other option, Mr Geraghty says, is to see if a new policy for the lower outstanding balance on the mortgage will save the homeowner money in the long run.

But this only makes sense if people have have paid off significant chunks of their mortgages. Otherwise, homeowners may actually be quoted higher rates because they are now older and perhaps not as healthy.