Mortgage protection is a policy which pays the bank upon your death to clear your mortgage loan, hence the reason why the banks insist on you taking it out!
The amount of cover on this type of policy reduces over time as you pay off your mortgage.
So, say you take out a mortgage for €300,000 over a 30 year term. If you die in the next few years with €280,000 outstanding on your mortgage, you policy will pay €280,000 to your bank which means that your mortgage is fully paid off upon your death. However if you die in 29 years and there is only €10,000 left outstanding on your mortgage, your policy will pay €10,000 to your bank to clear your mortgage. Mortgage protection never leaves money to your spouse or children, it simply clears the debt you owe the bank.
Life Insurance or Life Assurance as it is also known is different to mortgage protection because your family will receive a tax free lump sum should you die. So Life Insurances gives your loved ones financial security. You can get a policy that pays out a lump sum of up to €400,000 which can cover expenses such as bills, loans and childcare costs. To sum it up - Life insurance leaves a lump sum, mortgage protection doesn’t! Citywide Financial, December 2019