Advice on Mortgage Cover and Switching Mortgage provider

Leaky1

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In 2012 I took out a joint insurance policy on my mortgage. The policy is with Irish Life and is a reducing Life Mortgage Cover - it will pay the mortgage off in full on the death of either myself or my husband.

The policy is currently assigned to pay EBS in the event of death, as the mortgage is with EBS.
I am now considering switching mortgage to AIB (or elsewhere) to avail of a better interest rate.

I would hope to keep the same insurance policy and not go through that application process again. The monthly payment is very cheap.

I rang Irish Life and they said that the banks may have a problem or cause difficulties in carrying the policy over.
They explained it to me as follows:
1) EBS have the original policy deed and they will not release it until the mortgage is paid in full,
2) AIB will not take over the mortgage until they have the policy deed.
3) I'm stuck in the middle.

Can anyone advise how this works in a mortgage switching situation?

Irish life said the banks may come to an agreement between themselves. I don't really want to go down the switching route if I can't carry over the original insurance policy.
 
According to the Competition and Consumer Protection Agency:-

If you switch your mortgage, your options depend on whether you have your own policy or a group policy through your lender.

  • If you have your own policy, you can simply assign it to your new lender. The premium and level of cover will be the same as before, as long as the amount you borrow and the term of your mortgage does not change.
  • If you have a policy through your lender’s group scheme, your lender will cancel the policy when you switch your mortgage. So, you will have to apply for cover again and it may cost you more, as you will be older than when you first took out the policy. And if you are not in good health, you will have to pay a higher premium or you may not be able to get cover at all. Before you switch your mortgage, make sure that you can get mortgage protection insurance if your current mortgage protection is through your lender’s scheme.
If you pay off your mortgage earlier than planned, you can:

  • Cancel your mortgage protection cover and pay no further premiums, or,
  • Keep the policy and pay premiums until the original end date.
If you decide to cancel the mortgage protection cover, always check with the insurance company that the policy has been cancelled. Where the policy has been arranged through your lender, your lender will cancel the mortgage protection policy on your behalf but you may want to check to make sure. If the policy has not been cancelled by your lender, ask the insurance company what your lender needs to do to ensure the policy is cancelled and no more premiums are collected from you. Also make sure that if you have been paying premiums by direct debit, that you cancel the direct debit in writing.

If you pay off your mortgage earlier than planned, it is a good time to consider whether you need additional life insurance. If you decide to keep your existing policy, it would no longer need to be used to clear your mortgage. So any benefit would be paid to your dependants if you died before the policy finished. This could be a useful source of extra life cover. On the other hand, you may decide to take out new life insurance, depending on your age and state of health.

You may not have this option of keeping your mortgage protection policy if it was taken out through a group policy with your lender, as they will usually close off the policy when your mortgage is cleared.

- See more at: http://www.consumerhelp.ie/mortgage-protection#switch
 
It seems a real shame to me that there isn't a standing agreement between banks to assign a policy taken out through a group policy to a new lender in a switching scenario. It's no skin off an incumbent lender's nose if the mortgage is cleared and it could act as a serious impediment to a decision to switch lenders.

I'm actually surprised that there isn't a protocol between lenders to deal with precisely this situation.
 
Thanks Sarenco. I had read that part of consumerhelp.ie earlier today. I guess I was wondering how it works in real life. The website says "you may not have the option" of reassigning the policy, which suggests that sometimes u may have the option.

Irish Life said theyre happy to reassign thw policy, but it's getting the current lender to NOT close the policy out is the bit where I'm at their whim.

An increase in the policy cost could wipe out the benefit in mortgage switching. As you say, it would act as an impediment to switching lenders
 
I doubt it is under a group policy, don't think they are done anymore, ask that question of Irish Life. If it is not a group policy but your individual one that is assigned to EBS then existing lender cannot cancel it, only you can do that.

I would imagine that in the same way a solicitor can request your title deeds from the existing lender to facilitate a switch to another lender on their undertaking to either return them or pay off mortgage within a set time I'm sure a solicitor could also give an undertaking to the new lender to remove the assignment to EBS and re-assign to the new lender.

Even if there was a delay in the swapover the cover would still be in place should anything happen, there will always only be one mortgage amount so once the policy is sufficient to cover that there has to be a way around this, unless of course it a group policy but I doubt it is.
 
I doubt it is under a group policy, don't think they are done anymore, ask that question of Irish Life.

Interesting. Do you have any idea when lenders stopped arranging mortgage protection policies through group schemes?

Rightly or wrongly, I would hazard a guess that the vast majority of borrowers take out policies arranged through their mortgage lenders (and lenders have a legal obligation to make these arrangements) so it seems to me that this could be a fairly important issue for a lot of borrowers.
 
hi

We switched from BOI to KBC in early 2015. They requested the following re the life cover:

- copy of policy document

- letter from solicitor confirming "they will forward the original policy document should it become available"

- an up to date benefit schedule.

They accepted BOI wouldn't assign the policy to them until after drawdown so while it was a request on their documentation when I called the above is what they asked for.
 
Interesting. Do you have any idea when lenders stopped arranging mortgage protection policies through group schemes?

Well again I can only speak for one lender but I would imagine they are all much the same, it is so long ago since there were group policies that I couldn't even hazard a guess at the date, many years anyway in my experience.

It was changed from group policy to individual policies with the insurance company the bank were a tied agent of, these companies changed from time to time depending obviously on the commission deal they were giving the bank or some banks bought their own insurance company and stuck with them. While the lender would still arrange the policy it was not a group policy but a separate individual policy that the customer could continue on if the mortgage was cleared or move with them elsewhere if they wanted.

There was also a period of years when some banks did not bother assigning policies, once you had cover in place when drawing down there was no legal obligation for them to assign. However with the demise of the tiger this policy seems to have been reversed and lenders are back to assigning.
 
Thanks Monbretia, that's very helpful.

It sounds like this is unlikely to be much of a problem for mortgage protection policies taken out in the last 10 (15?) years or so. Does that sound about right?
 
I'd say so, I never came across it as a problem and processed tons of switchers. The last time I remember a block policy issue must be 20+ yrs ago when a customer who had skin cancer wanted to take out a new mortgage, under a block policy the old one had to be cancelled and new one applied for. As the customer had taken out the policy prior to his illness he was covered but cover was postponed on a new policy. Upshot of it was anyway that the life insurance company agreed to move him from the block policy and issue an individual policy with same t&cs as existing cover, very co-operative of them at the time.
 
Thanks for the replies everyone, it's given me hope that this might not be the problem I feared.
I'll ring EBS soon and ask what their procedure is as it is them who arranged the cover with Irish Life for me.
Here's hoping it runs smoothly.
 
It would be great if you could let us know how you get on for benefit of anybody else that comes across this thread.

Best of luck.
 
A bit late to the party but it won't be an issue. It's just a matter of coordinating the switch. Bank A has to unassign their interest in the policy and bank B have to assign their interest. Obviously, it can't be done at exactly the same time but once Bank B see their is a policy, they'll be fine.


Steven
www.bluewaterfp.ie
 
Hi Steven

Can you add anything as to when banks stopped arranging mortgage protection policies on a block basis?

The Competition and Consumer Protection Agency warnings on the issue sound quite alarming, perhaps unnecessarily so.
 
Hi Steven

Can you add anything as to when banks stopped arranging mortgage protection policies on a block basis?

The Competition and Consumer Protection Agency warnings on the issue sound quite alarming, perhaps unnecessarily so.

I know very little about them Sarenco. I've always worked as an independent advisor so never had anything to do with them. I only came across them 5/6 years ago when someone wanted to switch the agency of the policy to me only to be told it was under a group arrangement. From what I did see of them, I couldn't see any difference in price to a stand alone plan. Obviously, you can't use them at a later date if you switch lender.


Steven
www.bluewaterfp.ie
 
Obviously, you can't use them at a later date if you switch lender.

Understood Steven.

I suppose I'm really just trying to get a sense as to whether these types of block policies have the potential to frustrate any would be switchers or if these types of arrangements were abandoned so long ago that they are really only of academic interest at this stage.
 
I'm not sure when the group policies stopped but it may have been around the time that composite mortgage repayments were banned where your life insurance/house insurance/rep prot/mortgage all came out of your account as one repayment and was then divided up and apportioned by the lender. It wouldn't work after that as you didn't have an individual policy number with a group policy so couldn't make a separate payment.
 
I would see no issue here other than specific policy limitations, which per OP are not restrictors to re-assignment according to Irish Life. re-assignment of policies is a minor issue in the process of mortgage transfers and the security Depts of all banks are well used to dealing with them.
 
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