Should I cancel Mortgage Life Insurance?

JamesFlynn

Going through some files I noticed a letter from my mortgage provider bank that they "had no further interest" in the Mortgage life Insurance policy. The premiums are < €200/year. I've 5 years left on the tracker mortgage and the policy but have savings that could pay it off if needed.

Apart from the loss of insurance benefits (albeit I've no dependents), are there any disadvantages to cancelling the policy?

For example, if I was to apply for a new mortgage to buy a bigger home in a few years, would there be an issue getting Life Insurance on the new mortgage if I don't already have a policy? I'm healthy but am in my 40s.

I'm thinking of cancelling it but was wondering if there were any reasons to keep paying it?

many thanks,
James

Atlantic Dawn

You will require mortgage life cover in place as a condition to your mortgage. It can be through anyone but must be in place.

antix80

If you were going to apply for a higher mortgage, would the policy cover the loan amount and term (bearing in mind, your current mortgage protection is decreasing over the term if your existing loan) ?
Life cover gets more expensive as you age so if you take out a new policy you will likely be paying more and it may require medical underwriting (important consideration if your health changes).

Final consideration but the t and cs of your mortgage may require you to have a policy.

3DataModem

It is likely that the balance of your current life policy is extremely low (same as your mortgage) assuming it was a decreasing term benefit (the standard mortgage protection policy). If this is the case, the policy is of little value to you.

There is no benefit to having existing cover when applying for new cover. In fact in some rare circumstances it can be a hindrance (e.g. if you have a policy with 50k at risk, and you need 275k for the new policy, but the insurers threshold for triggering a full health check is 300k they will count existing sums at risk).

phormium

The existing policy is not of any use to you if applying for a new mortgage if it does not cover the amount and term of the new mortgage so no reason from that point of view.

As the bank has already released it's interest in the policy there is no reason why you cannot cancel it if as you say you are happy that you have enough savings to clear it if needed.

I noticed recently that I didn't even need a 'letter of no further interest' from a bank to cancel an assigned mortgage protection policy which I was surprised by but the insurance company told me they no longer needed it!

It would originally have been a condition of your loan offer that you have mortgage protection life cover in place but realistically once your loan is being paid etc the bank are not going to be doing anything, in fact if their interest is no longer noted they won't even be notified.

JamesFlynn

Thank you for the replies - very much appreciated.

It sounds like there's almost no advantage to keeping a mortgage life Insurance policy around after the bank sends a "letter of no further interest" if you have no dependents, or if you are otherwise well insured.

For me the amount outstanding on the mortgage is about €60k and I'd be paying almost €800 to insure that over the remaining 4 years of the mortgage. I only wish I'd taken action on that letter when I got it a few years back!

Henry Ford III

3DataModem wrote: »

It is likely that the balance of your current life policy is extremely low (same as your mortgage) assuming it was a decreasing term benefit (the standard mortgage protection policy). If this is the case, the policy is of little value to you.

There is no benefit to having existing cover when applying for new cover. In fact in some rare circumstances it can be a hindrance (e.g. if you have a policy with 50k at risk, and you need 275k for the new policy, but the insurers threshold for triggering a full health check is 300k they will count existing sums at risk).

Nah. Standard u/w limits are way higher.

antix80

Henry Ford III wrote: »

Nah. Standard u/w limits are way higher.

Not to mention there's nothing stopping op from cancelling their old policy.