What happens if I die without adequate Mortgage Protection

Ok,

This may seem like a fairly dumb question but I can't find the answer anywhere at present.

What happens if I die without adequate mortgage protection?

To put this in context - I have a mortgage protection policy at present that will cover everything. Unfortunately, I do a little climbing and work at heights on occasion. This results in a fairly nasty loading on the policy compared to the standard value. Due to (another) paycut, I'm looking to cut costs (again). I've stopped the climbing apart from the odd easy climb once a month or so (compared to 15+ days per month) and do keep it easy. My insurance company has said that this doesn't matter to my loading.

I'm thinking of going elsewhere and just not telling them that I climb. I could save nearly €40 per month. DOn't really want to do this but every bit counts these days. There are months now where I have less than €10 left. The climbing only costs petrol to Dalkey Quarry and i usually go on the way home so basically free. All other non-essentials are already gone the way of the Dodo.

However, looking at the worst case and I do die in an accident and my mortgage protection is null and void. What happens then? I have no dependants, etc so it is not a family home or anything like that. I assume the bank would have to sell the house to try and recover the costs as best they can (good luck to them). Can they sieze other assests as well? Things like pensions, savings, pictures to cover the cost also? These aren't listed as security for the mortgage so I don't think so and I can't find anything in my policy documents to say they can.

Can anyone fill me in? Also, I'm aware that my mortgage contract states I must have adeqaute protection in place and I'll be in breach of contract so i'd appreciate not getting hammered for that!

Thanks

Adrian.

Hi Adrian,

unfortunately the debt will not die with you, it will be down to the executor of your estate to discharge the borrowings from the proceeds of your estate.

It is worth your while resubmitting an application for cover based on what climbing you so now as you may not be rated if you have scaled back.

Thanks. I did resubmit and thats when they told me that it wouldn't change the premium. Apparently I need to have done no climbing for the last three years for it to make a difference (?). I've been to two other companies now and they say the same.

However, I was under the impression that they cannot chase others for my debts if I die? From reading your post, they can take everything I have including pensions, goods, savings, etc. But they couldn't go after my brother (next of kin and gets the lot under my will) to finish paying the debt off?

Thanks again.

If there is enough cash/assets within the estate to cover the negative equity after house has been disposed of as far as I know these will be fair game. As I already said the debt doesn't die with you, someone will have to resolve the issue. I'm open to correction but this is my understanding

I have no dependants, etc so it is not a family home or anything like that.

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Hi athom

We have a stupid piece of legislation designed to protect consumers which forces mortgage protection on single people who can never benefit from it.

Just cancel it. In most cases, the lender won't notice it. The insurance company should notify them, but they may not action it. I am not sure that they could do much about it if they did notice it.

I think that this is much better than taking out a policy which would probably be voided in the event of your death.

If you have equity in the home, this is definitely the thing to do. The lender won't lose if you die without insurance.

Just remember to take out insurance again if you do have dependents.

Brendan

athomson101 said:

However, I was under the impression that they cannot chase others for my debts if I die? From reading your post, they can take everything I have including pensions, goods, savings, etc. But they couldn't go after my brother (next of kin and gets the lot under my will) to finish paying the debt off?

Thanks again.

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No, once your estate is empty they cannot go after your brother. It is not his debt.
I'd agree. cancel the insurance, its a waste of money in your circumstances.

SarahMc

I'm fascinated by this going from a previous experience I had with a deceased relative.

Am I correct in my understanding of this

OP has a house with a mortgage on it, he lets the insurance go and in the event of his death the Bank will accept the house in full and final settlement of the mortgage even though it may be worth less than the mortgage.

All other assets as disclosed by OP such as pension pot, savings etc will not have to go to clear his liabilities, i.e the debt dies with him?

No.

The bank will raid any pension/savings to get the shortfall back. If there are no other assets the bank is on a loser and only get the house.

Thanks time,

that was my understanding, so in Op's case where he states if he leaves all to his brother (next of kin) what would happen?

The bank would issue proceedings against the estate so they can seize whatever assets are available. The brother would get nothing until the bank was done picking over the remains of the estate.

Thanks Time.

as always very informative, so really much cleaner for those left behind to have the mortgage protection in place assuming you care !!

The bank will raid any pension/savings to get the shortfall back

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Time said:

until the bank was done picking over the remains of the estate. .

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Hi Time

Do you not think that this language is emotive?

If the OP dies, he will have assets and liabilities.

The assets will be sold to pay off his liabilities.

There is no "raiding" or "picking over"

Brendan

athomson101, when you say climbing do you mean rock climbing? And for leisure purposes, not work related?

If that is the case you may be able to get a waiver with the company to specifically exclude rock climbing from the list of covered events. This should remove the loading assuming you not longer work at heights. You can then get specialist cover for rock climbing fairly cheap. Best to talk to MCI or check out . Question comes up there once a year or so.

Personally I think it is more important to have proper health cover for climbing than life cover. Climbs in Ireland are much smaller and the majority of falls don't result in death, just lots of medical bills.

Whatever you do don't lie about your climbing. Never lie on insurance forms.

You don't need insurance, but as stated it is probably a condition of your mortgage.

Please clarify what type of insurance you have, 'term' insurance is much cheaper than other types. Or see if the last posters excellent suggestion is an option for you.

If you are down to 10 Euro a month then maybe you need to have a look at other areas you can cut down on. Maybe do the moneymakeover section.

In reality the bank is going to do nothing if you just cancel the insurance.

Thanks for all the answers.

As stated, I've already cut all non-essentials to the bone (health insurance is not a non-essential as far as I'm concerned).

Basically, my reading of it all is that if I went down this road, the bank would likely get everything I own (pension, savings, etc) but if there was any money still owed on the house after all that, they lose. To be honest, I'm not too concerned about the bank losing out at the end of it all (I'd be dead so probably wouldn't care too much ...)

However, things may have turned around already. At an interview yesterday was offered a new job abroad at a LOT more money. I think it might be time to leave Ireland and not look back. Too much doom and gloom here at present. Rent the house out and leave.

Thanks again all.

A.

- sorry to come in here on your thread, but I wonder about Life Insurance. I understand that Life Insurance was/is virtually mandatory when taking out a new mortgage and, I presumed that in the event of death, the life insurance will pay out to the bank. Would than not solve the OP problem?

And if it covers the cost of the mortgage, then his next of kin will surely inherit a mortgage-free property?