Mortgage protection policy

Road-Hog

Just looking for a few opinions on this scenario.....

Sold house in June 2017. As is the legal requirement we had a mortgage protection policy associated with it (Irish life one), it was the cheapest version ie decreasing cover linked to the decreasing value of the mortgage on death of either of us......anyway with the sale of the house the mortgage for the property to which the policy was linked obviously disappeared and you would expect the mortgage protection policy to disappear also but no it continued to stay live. I only realized this last week some 17 months after the sale of the house, I just happened to check the payments leaving our account and also rang Irish life and they said no the policy continued as I never informed them about it.....I now need to write formally and also forward them with a Cert from the previous Lender confirming that the mortgage no longer exists is paid off before they will cancel the policy.......I then enquired about the €500 odd in premiums that I have paid since June 2017 and they told me it was not refundable.....Can this be correct...? If it is I find it scandalous........has anyone out there had a similar experience? Am I being naive in the way I thought...???

coylemj

What you had is effectively a term life policy with a diminishing benefit. It's rubbish for them to tell you that you needed a letter from the lender saying that the mortgage was paid off, all you have to do to terminate an MPP is to stop paying the premiums. An e-mail or letter telling them that you are cancelling the policy would eliminate nagging letters but you do not need permission from your lender.

Besides which, you always have the option to move insurance company during the life of a mortgage so cancelling an MPP does not necessarily coincide with the termination of the mortgage.

The deal with an MPP policy is that the insurance company first pays off the outstanding loan and the estate or surviving partner gets the surplus if there is any. Had one of you died during that 17 months, the survivor would have been paid the full life benefit since there was no loan outstanding. So technically the term life policy was still running with a prospective cash benefit on death. Which means the insurance company is within it's rights to refuse a refund.

phormium

Yes they are right, you didn't tell the insurance company to cancel it so they kept it going.

Correct as above had you popped your clogs while it was still going the amount left would have been paid out.

Although I did think you needed a 'letter of no further interest' from the bank if they policy is assigned to them. I needed one lately for a policy I wished to cancel, yes I suppose I could have just stopped the direct debit but would still have got the annoying letters from the bank.

coylemj

phormium wrote: »

Although I did think you needed a 'letter of no further interest' from the bank if they policy is assigned to them. I needed one lately for a policy I wished to cancel, yes I suppose I could have just stopped the direct debit but would still have got the annoying letters from the bank.

If you pay off the loan like the OP did, then the bank is no longer interested in the MPP. If you move the MPP to a new insurance company, the new crowd will inform your bank that their interests have been noted on the new policy.

So I still see no need why anyone needs a letter from your lender to the old MPP company to in effect 'release' you from your obligation to keep paying the premium. As I said above, a quick e-mail informing them that you have moved will do, solely to avoid them sending you nagging letters.

Henry Ford III

Was the MPPA policy assigned to the lender OP? If it was they'd need to release their interest. Don't bother chasing a letter - just stop the dd.

p.s. You won't get a premium refund I'd imagine. You were on cover after all and how could ILAC have known to cancel if you didn't inform them?

kippy

It may be beneficial to retain the cover.
You may find the sum insured (while reducing) is insured at a cheaper premium than if you were to look for a life insurance policy now. Primarily because the premium was worked out when you were younger.
Had a similar situation a number of years ago and we retained the policy.