Mortgage protection problem.

Apologies in advance if this is in the wrong heading.

I received a letter today from our mortgage provider informing us that the mortgage protection policy we had taken out with our mortgage 5 years ago had been cancelled 5 years ago, and the mortgage protection policy we have been paying every month with our mortgage premium was in actual fact the protection policy on our bridging loan we took out at the time. They admit it was their mistake and apologise for it, but say we have to look for our own protection policy as it is now too late to reinstate the original one. They have informed us that there is currently no life cover on our mortgage. I will call into the office in the morning, but what should I be asking/saying? Am I correct in thinking that had myself or my partner died then they would have refused to pay out? Is it maybe no big deal really as nothing actually happened? I'm pretty mad that we've had no cover for 6 weeks, and they seem to me to be washing their hands of us. Thanks in advance. Sue

If you've been paying into a policy of some sort then if one of you had died, that policy would have paid out. As it was originally taken out to cover your bridging loan then presumably the amount it's covering would not be sufficient to pay off your mortgage. Find out what level of cover is being provided by the mortgage protection policy you are paying and what the expiry date is. Perhaps you can continue to use it as part cover for your mortgage and just start a new policy to cover any shortfall.

The unfortunate part of it is that because you're now both five years older, the cost of a policy that you start now will be higher than one you took out five years ago. If you're in your 20s or 30s, that additional cost won't be that great. If you're in your 40s or 50s the gap could be substantial. If there have been any health issues in the past five years they would be relevant too.

I'd find out: -

(1) The amount of cover, expiry date and premium on the policy you have been paying.

(2) The amount of cover now required on the new policy.

(3) The cost of a new mortgage protection policy. Get quotes for this from the bank but shop around also for a better price.

(4) The cost of the mortgage protection policy if you had taken it out five years ago. If there's a big gap between what you'll pay now and what you would have been paying, you could ask the bank for some form of financial contribution seeing as they've admitted their mistake.

Liam D. Ferguson

LDFerguson I really appreciate your response. It has thrown up something I hadn't realised. I've just completed a couple of on-line quotes for the insurance and as you say the quotes for us being 5 years younger are roughly half the quote for our ages now. Over the remainder of the mortgage this is around an extra €9,000. Unfortunately the policy for the bridging loan ceased in December last year and we have had no cover at all for 6 weeks. Thank you, Sue.

Then I think you do have grounds for complaint against the bank, especially if they were also acting as your insurance agent.

How did the correct policy get cancelled? Was it a mix-up when the bridging loan was paid off - was it the policy covering the bridging loan that should have been cancelled at the time? Who's fault was that error?

If the bank have admitted their mistake and apologised for it as per your original post, then I think you should ask them what they intend to do about the €9,000 in additional premiums.

That is exactly what happened, the policy covering the new mortgage was cancelled and the bridging loan insurance continued to be paid until it reached the 5 year mark. They've totally admitted it was themselves at fault but want us source and to take out a new policy. Thanks Sue