Mortgage Protection should not be compulsory

There are plenty of go fund me pages where a spouse dies with young children and no mortgage insurance in place or house burns down and no fire insurance in place. For a certain minority of people they stop paying the mortgage or house insurance if they ever took it out in the first place and now need to rely on the charity of strangers in their plight.

It is to prevent this type of thing being widespread that we have the current practice.
 
Monbretia said:
I agee and to clarify as per subsequent post people with no dependents rather than being a sole owner as such.
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The thing is, a lot of people who have no dependents when they take out a mortgage acquire dependents not too long afterwards, while the mortgage is still substantially outstanding. If we want to avoid the prospect of widows and orphans losing their homes, a rule that looks just at the state of affairs when the mortgage is taken out will fail to protect a lot of widows and orphans.
 
As a vaper I disagree - close to €1000 a year. More than my annual gym subscription to a prestigious Dublin South Side gym to help me stop dying.
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That's because you are assuming that you have the same mortality rate as a non smoker when in fact there is a greater chance of you using the policy than non smokers. And there is something you can do to bring down the cost of your premium...


Why should sole owners pay for mortgage protection?
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Banks don't want to wait around for probate and deal with possible family squabbles and delays in dealing with the sale of the house. They want their liability paid off in full and close the loan. Add in that the mortgage won't be paid during that period, with interest accruing all the time. Add in the risk of a fall in property prices (rare but an underwriter will always look at the worst case scenario), the bank may not even recover the amount owed in those circumstances. A mortgage protection plan takes all that risk away and shifts the risk from the bank to the insurer and the mortgage holder pays for it.


Steven
http://www.bluewaterfp.ie (www.bluewaterfp.ie)
 
Steven Barrett said:
Add in the risk of a fall in property prices (rare but an underwriter will always look at the worst case scenario)
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Falls in property prices are not rare! In the last 40 years property prices in Ireland have fallen in eight of them.

Far, far more rare is a someone who takes out a mortgage at 30 dropping dead before the mortgage is paid off.
 
TomEdison said:
The thing is, a lot of people who have no dependents when they take out a mortgage acquire dependents not too long afterwards, while the mortgage is still substantially outstanding. If we want to avoid the prospect of widows and orphans losing their homes, a rule that looks just at the state of affairs when the mortgage is taken out will fail to protect a lot of widows and orphans.
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Of course some do but you not everything can be based on the what if, these people should have enough cop on to review their situation when circumstances change. Many people know full well based on their age or whatever that they will not be leaving behind widows and orphans when they take out a mortgage but being on their own a lifetime payout like income continuance or even serious illness cover could be of much more benefit when you have only yourself to depend on.
 
Monbretia said:
Of course some do but you not everything can be based on the what if, these people should have enough cop on to review their situation when circumstances change.
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The whole rationale for requiring mortgage protection cover in any case is a recognition that not everybody does have enough cop on to effect the cover needed to protect their dependants. It make no sense to have a rule to protect dependants who are in place at the time the mortgage is effected, but to say that other dependants are left to the mercy of whatever cop on the borrower may — or may not — have. Why should one group of dependants be protected from the improvidence of the borrower, but the other not?
 
It's not that one ranks over the other, it's that you can really only deal with the situation at present and make best decision based on existing or expected situation, some people are pretty sure they have none or will have no dependants.
 
Flybytheseat said:
AIB kindly gave me a derogation for mortgage protection insurance as I am over 50. Cant understand why it is a legal requirement for the under 50's
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The odd thing is that it really only is necessary for borrowers over 50 - the odds of a younger borrower dropping dead is surely a lot lower, yet you can only get a derogation once you're over 50?
 
Peanuts20 said:
Out of curiosity, I put in a "makey up" request on Bonkers.ie and for 34 yr old non-smoker for €500k cover I was quoted €252 a year
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What you were quoted and what you pay once the application goes to underwriting and back are two different things. My quote went up by 18 euro a month after that. The headline quote you are given on the initial inquiry is based on a very average figure and not your exact health situation.
 
Brendan Burgess said:
Why should a single owner with no dependents have to pay for mortgage protection?
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Because when they die they may no longer be single with no dependents.

This is all about pooling risk. The risk we are protecting against here is someone dying with an outstanding mortgage on their home, and dependants living in it. The fact that you have no dependants at the time you effect the mortgage may reduce this risk but it does not eliminate it. It's quite commmon for people who have mortgages to acquire partners and/or beget children. (Indeed, some would say that being a homeowner improves your pulling power and so makes it more likely that you will couple up!)
 
Motor insurance is a legal requirement to drive a car and there is a protocol to kind of oblige providers to give you one.

In a similar way health insurance is community rated and a provider can’t refuse you cover.

But a mortgage is the only product where insurance is compulsory but the industry is not legally obliged to provide you with it.

Am I wrong?
 
Dr Strangelove said:
mortgage is the only product where insurance is compulsory
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The 'get-out' clause is that you can apply for a waiver, but there's no obligation to grant it, and your bank can still refuse a mortgage without it.

The solution is relatively simple
- design a checklist where insurance is mandatory if you meet these conditions - and you must be provided with cover.

If you don't meet conditions, its optional, if highly recommended. And you sign 20 different documents that you are aware of implications.
 
All that such regulation would mean is that cover would be offered but only at a very high premium cost. Unless regulations to impose price caps were also introduced?
 
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