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Mortgage Protection Insurance - Who is the Beneficiary?

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  • 13-02-2014 3:12pm
    #1
    gamblor101
    Registered Users Posts: 158 ✭✭


    Is it paid straight to the bank or does it go to the deceased's estate?

    If it goes to the bank what happens if, for example, the insurance payout was €100K but the outstanding mortgage was only €80K. Does the bank keep the extra €20K or the insurance company only pays out €80K or is there another option?

    If it goes to the deceased's estate are they obliged to pay the outstanding mortgage with the money? Would they get the full €100K or just the €80K?


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    #2
    phormium
    Registered Users Posts: 3,340 ✭✭✭phormium


    Depends on whether it is assigned to the bank or not, if it is they will get it and give back any surplus. If not assigned estate will get it generally and normally would be used to pay off mortgage if it was in sole name, not as clear if in joint names, you could decide to continue with it.


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    #3
    Henry Ford III
    Moderators, Business & Finance Moderators Posts: 17,711 Mod ✭✭✭✭Henry Ford III


    phormium wrote: »
    Depends on whether it is assigned to the bank or not, if it is they will get it and give back any surplus. If not assigned estate will get it generally and normally would be used to pay off mortgage if it was in sole name, not as clear if in joint names, you could decide to continue with it.

    Joint name mppa are always joint life first death. A claim means the residual sum assured is paid out, and the policy ceases.


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    #4
    phormium
    Registered Users Posts: 3,340 ✭✭✭phormium


    Unless we know exactly what type of policy the OP has we can't be sure it is joint life first death, various policies have been sold over the years to cover mortgages, some are joint some are dual.


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    #5
    gamblor101
    Registered Users Posts: 158 ✭✭gamblor101


    The scenario above is just hypothetical. I'm just reviewing my insurance requirements at the moment.
    When I first got my mortgage I was a single man and this is reflected in my current insurance arrangements. Now I'm in a long term relationship with a few kids I want my partner included on a mortgage protection policy.

    Do all banks insist that they are the beneficiary on Mortgage Protection Policy or do you just have to show the bank that there is an insurance policy in place that can cover the outstanding balance of the mortgage?


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    #6
    Henry Ford III
    Moderators, Business & Finance Moderators Posts: 17,711 Mod ✭✭✭✭Henry Ford III


    phormium wrote: »
    Unless we know exactly what type of policy the OP has we can't be sure it is joint life first death, various policies have been sold over the years to cover mortgages, some are joint some are dual.

    OP already said it was mortgage protection (reducing term) which as I said is always joint life first death.

    p.s. If anyone took out and assigned a dual life policy to a lender I'd question their advisor. Any lender needs one sum assured and not two.


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    #7
    Henry Ford III
    Moderators, Business & Finance Moderators Posts: 17,711 Mod ✭✭✭✭Henry Ford III


    gamblor101 wrote: »
    The scenario above is just hypothetical. I'm just reviewing my insurance requirements at the moment.
    When I first got my mortgage I was a single man and this is reflected in my current insurance arrangements. Now I'm in a long term relationship with a few kids I want my partner included on a mortgage protection policy.

    Do all banks insist that they are the beneficiary on Mortgage Protection Policy or do you just have to show the bank that there is an insurance policy in place that can cover the outstanding balance of the mortgage?

    Some but not all take formal assignments. If an assignment is taken they'll be informed if premiums aren't paid.


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    #8
    coylemj
    Registered Users Posts: 25,437 ✭✭✭✭coylemj


    gamblor101 wrote: »
    Now I'm in a long term relationship with a few kids I want my partner included on a mortgage protection policy.

    Why? If you have a mortgage protection policy and you die, the policy will pay off the outstanding balance and the house will be debt-free.

    If your partner dies before you, it will not affect the mortgage but you would probably need some money to look after the kids in which case you should consider taking out term assurance on your partner's life.


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    #9
    billyhead
    Registered Users Posts: 9,849 ✭✭✭billyhead


    Sorry for going off topic op but is the mortgage protection insurance cumpulsory in order to keep paying back a mortgage with a financial institution?


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    #10
    gamblor101
    Registered Users Posts: 158 ✭✭gamblor101


    coylemj wrote: »
    Why? If you have a mortgage protection policy and you die, the policy will pay off the outstanding balance and the house will be debt-free.

    If your partner dies before you, it will not affect the mortgage but you would probably need some money to look after the kids in which case you should consider taking out term assurance on your partner's life.

    My current thinking is that if either of us die the mortgage is cleared. Then I'm also considering a dual term insurance policy ( the cost difference between joint and dual term insurance seems to be small enough to be worth the extra benefit) so that whoever is alive after a payout can support themselves and the kids.


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    #11
    coylemj
    Registered Users Posts: 25,437 ✭✭✭✭coylemj


    billyhead wrote: »
    Sorry for going off topic op but is the mortgage protection insurance cumpulsory in order to keep paying back a mortgage with a financial institution?

    Lending institutions insist on it, otherwise if the principal money-earner dies, they could end up with a widow(er) and several kids in a house and not enough income to continue the repayments.


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    #12
    coylemj
    Registered Users Posts: 25,437 ✭✭✭✭coylemj


    gamblor101 wrote: »
    My current thinking is that if either of us die the mortgage is cleared. Then I'm also considering a dual term insurance policy ( the cost difference between joint and dual term insurance seems to be small enough to be worth the extra benefit) so that whoever is alive after a payout can support themselves and the kids.

    If you mean that you'd take out such cover in addition to the mortgage protection policy then I would agree that is an excellent idea. The mortgage protection policy is designed to pay off the outstanding balance on the mortgage so it would normally not provide any benefit beyond that.


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