Mortgage Protection with Existing Illness

[lily27]

I'm in the process of purchasing a home with my partner, its under an affordable housing scheme. I have been declined mortgage protection because of an existing illness and a pending operation. My bank have told me they will not move forward with the mortgage unless we are both covered.

Can anyone offer advice on a particular insurance company that perhaps specialise in covering people with illness's?

Also, I have an existing policy since 2002 (approx.). I asked the bank yesterday can this policy be changed to cover the mortgage, they said if it is changed to include my illness's my premium will rocket, I feel now I'm going to be penalised on a policy I had prior to my illness, and this seems unfair. Can this be done?? Also my existing policy doesn't cover my illness or pending operation, so I feel if I'll be penalised when updating it, I should at least get something back in the line of compensation for the illness's i'm being penalised for.

Can anyone offer any advice or words of wisdom??

 

[ClubMan]

I'm in the process of purchasing a home with my partner, its under an affordable housing scheme. I have been declined mortgage protection because of an existing illness and a pending operation. My bank have told me they will not move forward with the mortgage unless we are both covered.

Can anyone offer advice on a particular insurance company that perhaps specialise in covering people with illness's?

Have you tried a few life assurance underwriters/brokers? Don't just stop after one refusal.

Also, I have an existing policy since 2002 (approx.). I asked the bank yesterday can this policy be changed to cover the mortgage, they said if it is changed to include my illness's my premium will rocket

Would that policy offer sufficient cover (term and amount) to cover the mortgage? If so then I don't see how (re)assigning it to the lender (if possible) should affect your premium at all. The lender is not really going to give you independent, professional advice on this matter.

I feel now I'm going to be penalised on a policy I had prior to my illness, and this seems unfair. Can this be done?? Also my existing policy doesn't cover my illness or pending operation

Do you mean that if you died due to your existing condition the existing life assurance policy would not pay out?

 

[LDFerguson]

Did you have your illness in 2002 when you took out the original policy? If not, and you answered all the questions on the application truthfully at that time, your subsequent illness should automatically be covered on it; there should be no "updating" required.

However, if the existing policy doesn't have enough cover or doesn't have enough years left on it to match your new mortgage, then you'd have to get the policy updated which would probably require disclosure of your illness and whatever terms the insurer might specify.

As an alternative, is there any way that your mortgage amount/term could be adjusted to suit the original policy?

 

[snowdrop]

I stand to be corrected but I was under the impression that a bank could not refuse you a mortgage if you were refused insurance cover - they can and should waive the requirement.

In my own case, my partner has life insurance assigned to the bank for the mortgage. I was refused cover. We also have an investment property mortgage and have no life cover on that property.

 

[PM1234]

You are not really being penalised for having a policy prior to getting your illness. The original policy was underwritten with your medical history being as it was then. This cover remains in place. I'm unsure what you mean when you said that the existing policy does not cover your current medical condition and pending operation. What type of policy is it? Did you take out basic mortgage protection or did you take out additional benefits? If you have additionall benefits in place you will need to read the terms and conditions of your policy plan to see what illnesses are covered under the policy.

You might (depending on personal circumstances) be better off leaving the existing policy in place and try to take out a new policy to cover the increased amount only. This might keep your premiums lower than if you were to take out a new policy for the total amount with your current illness. Then have both policies assigned to the lender. If you are doing this ensure that the information disclosed on your new policy will not affect your existing one.

Shop around and if you are refused cover, ask for the refusals in writing. The lender may but does not have an obligation to waive life cover.

To strengthen your case, you could also ask the lender if they are willing to use another property (if applicable) as additional security.

Update: I re-read your original post and if you are applying under AH the last line of my post will probably not apply.

 

[LDFerguson]

I stand to be corrected but I was under the impression that a bank could not refuse you a mortgage if you were refused insurance cover - they can and should waive the requirement.

The Consumer Credit Act effectively says that you must have life cover to protect your home mortgage if you are under 50 and can get cover at a reasonable premium. If any of these conditions don't apply, the Act allows the lender discretion to proceed without life cover...but only if they want to. A lender can and will use discretion as to whether or not they will lend without life cover - typically they will look at the strength of the application, whether or not there is a second income, how high the LTV % is and so on.