One third of homeowners don't know difference between mortgage protection and life insurance

ONE-in-five people admits to having no idea how much they are paying for their mortgage protection.

Meanwhile, a third of people are confused about the difference between mortgage protection and life insurance, according to a survey.

Mortgage protection cover is an insurance policy that will pay off the loan in the event of death. Having it in place is a legal requirement. Life insurance pays out a cash sum in the event of death, but is not required when taking out a mortgage.

New research from Aviva Ireland shows the majority of respondents understand that the purpose of a mortgage protection policy is to ensure the outstanding mortgage is paid off in the event of the policyholder's premature death.

But one in five incorrectly believes a mortgage protection policy will also help them to pay their mortgage if they suffer a prolonged illness.

Another 16pc believe that the policy will help them if they lose their jobs.

Ann O'Keeffe, the head of individual life and pensions at Aviva, said lenders insist on their mortgage customers taking out a protection policy. But it is often an afterthought on the day people take out their mortgage.