Mortgage insurance questions

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bond-007

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I have got a 150k mortgage which I sign for tomorrow. The house is valued at 300k. We have taken out a mortgage protection policy for 160k and buildings insurance for 150k which is the cost of rebuilding the house etc.

We think the mortgage broker is trying to scare us by saying the mortgage protection policy is not enough and needs to be increased in value.

Will the solicitor explain this to us or is this just an attempt to generate commission on insurance products.

Any advice would be appreciated.

Regards
007
 
On what basis is the broker saying that the current level of cover 'isn't enough'?

Assuming you have taken an interest rate of 6% or higher etc. in your quote, then I don't see the issue, i.e. there is no need for a level of cover higher than the outstanding mortgage.
 
I don't see why to be honest-as long as the interest rate you were quoted for takes into account likely/projected rate rises, I don't see why you need additional cover.

Maybe one of the brokers who contributes can outline why +10% might be a good idea?
 
Doesn't make sense.

A mortgage protection policy commission rate is 90% of the 1st years premium. For an average risk the premium is tiny €20-€25 p/m. A 10% increase would only pay an extra maybe €27 in commission (spread over 12 months).
 
Do both notions make no sense RS2K, i.e. that the broker would recommend a 110% level of cover and that they would be driven to do so by the additional commission (I figured this would be tiny).
 
I think it's more the fact that we got a policy independantly and not thru them. Makes sense now.
 
You are only required to have mortgage protection cover up to the amount you are borrowing from the bank.
 
Saw our solicitor today and there is no legit reason for the 110% MPC. What insurance we have is fine.
We do need to have buildings insurance for 190K which is 40K over the mortgage amount. What is the reasoning there, not that we are worried about it?
 
Hi Bond-007,

It is at the banks discretion what sum insured you need for your insurance. It should in theory match the rebuilding cost, because in the event of a total loss claim that is the maximum you will ever receive. Although having said that the premium applied to this €40k is not excessive.

Michael (for Atlantic Insurance)
 
The solicitor will advise on legal requirements-they may not be the best person to outline possible financial implications.

Re. the buildings insurance-again who told you and why?

The bank should have received a valuation which would be the reinstatement cost they would look for on the policy. I tried to calculate the reinstatement cost for our latest house and fell around €20,000 short-even though I had used the SCS guidelines. So how did you calculate the reinstatement value?
 
The bank have supplied the figures for the buildings insurance as it was on the letter of offer. The bank are demanding the 190K buildings insurance.

Actually it cost only €2 extra to add the 40k required. :)

Hopefully the policy will arrive on Monday in time for a Friday drawdown.
 
bond-007 said:
We do need to have buildings insurance for 190K which is 40K over the mortgage amount. What is the reasoning there, not that we are worried about it?
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As mentioned above you need to insure the property for the rebuilding costs (and not the market value or the mortgage amount) which should initially be estimated by the lender in their valuation report and which should be reviewed each year to take account of (construction industry) inflation to ensure that you are not over, or worse still under, insured as far as a possible. The SCS guide to house rebuilding insurance is useful as a rough guide/ready reckoner.

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bond-007 said:
The bank have supplied the figures for the buildings insurance as it was on the letter of offer. The bank are demanding the 190K buildings insurance.

Actually it cost only €2 extra to add the 40k required. :)
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Add €40K to what? Are you confusing mortgage protection life assurance cover and home/buildings insurance cover here by any chance? These are two separate issues. The former must cover the mortgage amount while the latter must cover the rebuilding cost of the property. They are not linked in any way!
 
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