Dual Life Mortgage Protection Policy after death of one ?

[citroendave]

Can anyone confirm what happens to a dual mortgage protection policy when one of the 2 people insured die? Policy is assigned to lender and on death the proceeds of first death are used to discharge mortgage. In reality, would the lender (1) ask the life insurer to cancel the mortgage protection policy as mortgage is paid off or (2) release the assignment held so the surviving customer has a mortgage protection policy in their own name and lender wouldn’t get .

If the answer is (1), would the surviving policy holder have any recourse with the lender where the policy was cancelled because of instruction received from the lender and then person can’t get cover reinstated because of current medical conditions.. thanks

 

[Corola]

If the mortgage protection policy was arranged separately and not by the bank, then once the mortgage is fully paid off they must release the assignment back to the customer. Whether through death of the first life, selling the house, switching mortgage, overpayments of capital. They are not authorised to cancel the policy.

If the policy was arranged by the bank then they would cancel the policy once the mortgage was cleared, but that would be a joint life (one payout) not dual life policy.

 

[citroendave]

You’ve jogged the memory. The reason for the dual life policy was that it much better value than the joint policy (assuming first death). The lender’s offering at the time was joint life only and the bank would be the grantees on the policy. This allowed them to cancel the policy once they no longer had an assignment i.e paying the mortgage off early. Thanks.

 

[Monbretia]

But in your example there would be no benefit to paying for a dual life v a joint life if the bank was going to cancel it as soon as the mortgage was finished? That kind of doesn't make sense, a joint one at the cheaper cost would have done the same thing.

I always found the biggest issue with a dual policy was when first life died and mortgage was paid off then quite often it was assumed the policy was gone and whether through closing of joint accounts or whatever often the policy lapsed as payments did not continue to be paid.

 

[citroendave]

The cost of the dual life with Friends was cheaper than the joint life policy offered by bank at the time. Increased mortgage repayment over the years means that the death claim amount on each policy is much higher than the outstanding mortgage and mortgage will be repaid before policy expires. I want to ensure that the bank releases assignment when mortgage is paid off and we get ownership back on the policies.

 

[Steven Barrett]

The bank has no interest in a policy once the mortgage has been paid off, whether through a premature death or just paying off the mortgage. In a claim situation, the bank takes what is required and if there is any surplus, it goes to the estate.

 

[BigPineapple]

Assuming it is a Dual Life Level Term policy (Can you even get Dual Life with Reducing Term??).

Anyway for Dual Life Level Term policy, it was explained to me, if one die, the pay out is used to pay the bank and any balance left over is yours (surviving person) to keep. You continue to pay the monthly insurance premium until the surviving person die or you reached the end of your policy in order to keep the cover for the surviving person.

As for the bank, I don't think they can cancel it if you bought the policy separately. And once they are paid off, they would have no further interest so would be expected to release assignment.