Excessive Mortgage Protection

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cully

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Hi - new member, first post.


Have a query regarding mortgage protection policy I was sold by Mortgage Broker.
I bought a house recently with my fiancee and have a mortgage of €385k on a house we paid €400k for (had to pay 24k SD as well)
Broker told me we would have to take out dual life policies costing €121 in total per month. This policy will pay out €385k in the event of each of our deaths during the term of the mortgage.
At the time I queried the cost as I had recieved much lower quotes for more basic protection. He told me that because we were borrowing 96% the above cover was necessary.
Both myself and fiancee are members of defined benefit pension schemes with "death in service " payout of €180k for myself and €150k for herself.

Did I need to take out the policy above or was the broker just making more commission?
Any advice/comments welcome


Cully
 
Barring minor exceptions all owner occupiers are obliged by law (Consumer Credit Act) to take out mortgage protection life assurance (MPLA) covering the life of each mortgage/property holder and for the initial amount borrowed. The loan to value ratio (96%) is irrelevant so I don't know why it was mentioned. Are you sure that the broker was not talking about something else such as indemnity bond insurance for the lender? You were/are free to shop around for the best deal if you think that €121 is too expensive. It's impossible to judge if this may be the case without more details about your overall situations (e.g. age, type of policy - see below, smoker/non smoker, health issues, policy term etc.). Work related death in service benefit/life assurance cover normally cannot be assigned to a lender and does not obviate the need for MPLA.

Mortgage Protection and Mortgage Repayment Protection Policies
 
cully said:
Did I need to take out the policy above or was the broker just making more commission?
Click to expand...

No and yes.

Sarah

P.S. Unless there are circumstances you haven't posted about (children or other dependents) which would warrant additional life cover. Even so, IMHO, it's inappropriate to assign anything other than basic mortgage protection to the lender.

www.rea.ie
 
cully said:
At the time I queried the cost as I had recieved much lower quotes for more basic protection. He told me that because we were borrowing 96% the above cover was necessary.
Click to expand...

Our first mortgage was for 100% and we did not require anything other than basic mortgage protection.

Was the broker also arranging the life assurance?
 
Sarah W said:
P.S. Unless there are circumstances you haven't posted about (children or other dependents) which would warrant additional life cover.
Click to expand...
What additional cover? The original poster says that the cover was for the mortgage amount as far as I can see.
 
Policy type is level term with conversion option

I am 30 yrs old and was smoker when mortgage taken out - have since given up. Herself is 29yrs old and also gave up two months ago.

Cover is 385k level term

Broker organised mortgage through TSB (4.54% fixed for 2 years), Mortgage Protection and House Insurance through Hibernian

No Children
 
A non smoker is defined as someone who hasn't smoked for 12 months but even with quoting you both as smokers decreasing cover (mortgage protection) for €385,000 comes in at €62 for 30 years or €72 for 35 years (fixed premiums). Is there any reason why you took dual life, level term convertible cover other than on the brokers recommendation?

S/he should have provided you with a "reasons why" letter with the proposal form setting out exactly why the policy was being recommended. If you can't find it ask for a copy. I'd be interested in the reasoning.

Sarah

www.rea.ie
 
Level term is what's costing you, and that you smoke. Declining benefit is cheaper, as the cover reduces in line with the expected repayments on your loan. I'd wait until you are both off the cigarettes 12 months, and then shop around for declining benefit life assurance for the balance left on your loan at that stage.

Edit: post crossed with Sarah. Based on what she says, €121 a month seems very expensive so it may be worth shopping around even before you reach the 12 month threshold.
 
At the time we knew of the 12 month rule and hence were honest!

Sarah,

The figures you have mentioned are more in line with the cheaper options I was quoted. Will go back to broker and ask for letter of explanation.

Is it easy to get out of this policy come renewal time next year?
 
You don't have to wait a year (the broker *may* tell you you have to as all the commission is paid in the first 12 months) - you can arrange a new policy, contact PTSB to assign it and then cancel the current one.

Sarah

www.rea.ie
 
At the time I queried the cost as I had recieved much lower quotes for more basic protection. He told me that because we were borrowing 96% the above cover was necessary
Click to expand...

PTSB would have only insisted on level term if it was an interest only mortgage on your PPR, otherwise decreasing cover would have sufficed.

You can replace the policy now, you do not have to wait 12 months. you will have to pay smoker rates though for 12 months post ceasing smoking.
 
Molly,
We are paying both capital & interest so I am waiting to hear from my broker as to why he recommended this policy

Thanks
 
I'm with Sarah - you've been over-sold the policy, unless you have a significant interest-only period on the mortgage (which is about the only extenuating circumstance I can imagine for your broker). Level-term policies, IMO, are not worth it, particularly where you're already financially secure as regards pension schemes and death-in-service benefit.

We did even better than the 385k declining balance cover quoted: €60 a month for €500k declining over 30 years (BoI... no affiliation). Both NS, but I don't think it makes that big a difference.
 
cully said:
Molly,
We are paying both capital & interest so I am waiting to hear from my broker as to why he recommended this policy

Thanks
Click to expand...
In the meantime, as suggested above, why not just shop around for cheaper decreasing term cover and possibly save yourself a few bob?
 
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