Is your mortgage protection insuring more than you actually owe?

How Irish mortgage protection is designed to work

Most people arrange mortgage protection once, assign it to the lender, and move on. That is entirely reasonable — it is a requirement for drawing down the loan rather than a product most of us set out to shop for. One consequence, though, is that the policy is rarely revisited, and a useful question tends to go unasked: does the amount I'm insured for still line up with the amount I owe?

For a fair number of Irish policyholders the two have drifted apart. Here is how that happens, and what, if anything, to do about it.

Mortgage protection is a *decreasing-term* assurance, and the design is sound. Your cover is set to fall broadly in step with your mortgage, so that if you die during the term the policy clears whatever is left on the loan. Cover is highest at the start, when you owe the most, and reduces as you pay the mortgage down, reaching zero at the end of the term alongside the loan.

In an ideal match, two lines — your falling debt and your falling cover — would track one another closely for the whole term. In practice they can diverge, and the reason is a technical one rather than anything untoward.

The 6% assumption in the schedule

The rate at which your cover decreases isn't linked directly to your specific mortgage. It is set at outset against a *notional* amortisation schedule, and the long-standing convention across the Irish market uses an assumed interest rate of around 6%. This is a market standard rather than a quirk of any one insurer, and it predates the lower-rate environment many borrowers have taken out mortgages in more recently.

The assumed rate matters because interest rates change the *shape* of how a loan pays down. On a higher-rate loan, more of each early repayment goes toward interest, so the balance stays higher for longer and falls away more steeply near the end. On a lower-rate loan, more of each repayment goes toward principal from the start, so the balance comes down faster in the early and middle years.

Cover is drawn to the 6% curve, which reduces relatively slowly at first. A mortgage at a lower rate pays down faster than that curve. So for much of the term the cover can sit somewhat above the actual outstanding balance — meaning you may be insured for a little more than you currently owe.

What the difference looks like in euro

We modelled this across representative Irish borrowers in our working paper, *The Decreasing-Term Anachronism* (MWP-2026-03). Averaged over the life of a policy, the gap between the cover in force and the balance actually outstanding came to about €14,332, and it was largest in the mid-years of the term — around €22,292 — where the notional 6% schedule and a lower-rate mortgage differ most.

In other words, through the middle stretch of a typical term a borrower may be carrying cover some twenty thousand euro above the loan itself, with premiums calculated on that higher figure.

Is more cover a problem?

Not necessarily, and it is worth being even-handed about this.

Extra cover is valuable if it does something useful for your family. On a policy assigned to your lender, the payout's primary job is to clear the mortgage. Whether any amount above the outstanding balance passes to your family depends on how the individual policy is written and assigned, so it is worth checking rather than assuming either way. For some households the difference is immaterial; for others, cover that is closely matched to the balance — at a correspondingly lower premium — is the better fit.

If leaving your family a lump sum *on top of* clearing the house is something you actively want, a decreasing-term policy is not really built for that purpose. A separate level-term life insurance policy — cover that stays flat and pays your family directly — is the more straightforward way to arrange it, and typically better value per euro of guaranteed benefit.

A simple check

You don't need to work through amortisation curves to see where you stand. Three steps cover it.

First, compare what you're insured for with what you owe. Your annual mortgage statement shows the outstanding balance; your policy schedule shows the current sum assured. If the sum assured is noticeably higher than the balance, the two have drifted.

Second, if you'd prefer cover matched to your actual balance and term, it is easy to get a whole-of-market quote and compare. Irish term assurance carries no exit fees, so switching to a right-sized policy is straightforward — with one firm rule: never cancel an existing policy until the replacement is confirmed in force in writing.

Third, if part of what you wanted was provision for your family rather than only clearing the loan, it can make sense to separate the two: keep mortgage protection sized to the mortgage, and put family cover on its own level-term policy where the payout is unambiguous.

In short

Decreasing-term mortgage protection is a well-designed product doing a sensible job. The point here is narrower: a market convention fixes cover to a 6% assumption that many current mortgages no longer reflect, and policies are seldom reviewed once in place. The result is that some Irish homeowners are insured for a bit more than they owe.

Checking where your cover sits against your balance costs nothing and takes only a few minutes — and for many people it is a useful way to confirm the policy still matches the mortgage it was set up to cover.