Change of Mortgage Protection Policy?

rua327

Last year I started a new mortgage protection policy because it was much cheaper than the policy that I took when getting my mortgage one year earlier (didn't shop around).

The new policy is through a broker and with a reputable company, and covers the mortgage (decreasing) if myself or my wife ever die (barring suicide).

Is it possible to shop around every year for mortgage protection insurance, as you would shop around for car insurance, or is there a problem with this?
The broker said that eventually nobody would cover me because they know I would be gone a year later, I think this is bull.

Surely, you can approach a company and ask them to protect your mortgage on a year by year basis, considering the mortgage is decreasing year by year.

Then I could avail of an introductory offer of circa 150euro rather than the circa 300euro by renewing my policy.

Any information would be greatly appreciated. :eek:

Dempo1

Good Thread, I am caught with two Mortgage protection policy requirements, one for the original mortgage and a second for the top. I have a very small combined mortgage of €67k and am paying an enormous amount each month. Like the OP i foolishly accepted what was being offered my the mortgage provider but started to ask questions last year on being made redundant. On my house insurance alone i saved almost 70%. I began the process of looking at the Mortgage protection insurance and it was a bureaucratic nightmare but i will now revisit this depending on any advice submitted. Unfortunately i am told that even though i have a top up on original mortgage, it is considered a separate mortgage an requires separate cover, seems ludicrous to me, surely one policy and price could be permitted to cover total mortgage liability.

eagle_i

With car insurance premium is based upon age and gender, then you are given discounts for clean licence, length of clean driving history etc.. On the other hand Life Insurance/Mortgage Protection cover premium is based upon your age and gender too, also smoker status, but your present and historical health situation also dictate, ie. The older you get the more expensive the cover and any changes in your health circumstances can determine whether you will be accepted by the insurance company at all, or at higher premium rate, or at a restricted level cover. Therefore playing the game of switching insurance company or effecting a new mortgage protection policy each year can be a dangerous one, for this reason it is not recommended.

While there is nothing stopping you from doing this, as mentioned above the older you are the more expensive the cover. There will come a stage where you may not be able to move insurer, perhaps due to health circumstance and the policy you are stuck with may be more expensive than what you started out with and in the long term end up paying more!

Your broker to some extent is correct, ultimately he is restricted from helping you in this manner as this would be considered churning the business which is illegal and can be construed as miss-selling. A broker would have to show very good reason for reselling this type of business each year, but to do it too often would seriously affect the broker’s relationship with insurers. I know you couldn’t give a feck about the broker’s business relationship with the insurers and you just want a cheap deal, but that is not how the broker market works. There is nothing to say you have to stick with the initial policy for ever and a day, a good broker will do a review of your life policies every 3-5 years, provided it is in your interest to change the cover to another provider, or even perhaps effect a new policy for the cover with the current provider the broker will make that recommendation, once it is in your best interest!

An alternative to the broker market, is the online discount brokers. I’ve covered this in a previous post here. I would like to reiterate to go down the execution only route (see link for the explanation) it is not for the faint hearted, you need to understand the type of policy you require and be sure that it is the correct policy you are purchasing.

Dempo, you are correct in saying one policy can cover the original mortgage and the subsequent top-up. Once the single policy covers the full mortgage balance and the term of the policy meets the longest mortgage term, if the top-up is on a different term to the original mortgage. Eg. Original mortgage is say €20k with a remaining term of 10 years and your top-up mortgage is €47k with a term of 15 years, then you need a policy to cover €67k with a minimum 15 year term. Once the policy meets that total mortgage balance and the term at a minimum the longest mortgage term the mortgage provider should not have any issues. My advise is to go to an independent adviser and have all your insurances assessed. On a final note do not cancel any cover you have in place until a new policy is in place.

Dempo1

Fantastic insight and advice, much appreciated!

rua327

Top response, exactly what I was looking for and very much appreciated. Think I will stay with the insurer this year after your advice. baby on the way, and not getting any younger,and got a good price on the house insurance from tsb if anyone is interested (I swear I have NO affiliation WHATSOEVER)...

Thanks again.

Rosie30

In a bit of a dilemma.... Have mortgage protection with Aviva and it is working out at about 82euros a month which I'm thinking is pretty dear. Any recommendations on who is competitive at the moment? Its one of those policies that grows each year. Got a serious illness policy too and that has increased to about 80euros a month. Thinking this is a waste of money. Feel totally ignorant in regards to understanding it all and feel am being ripped off. Any advise greatly appreciated!

Dempo1

Rosie30 wrote: »

In a bit of a dilemma.... Have mortgage protection with Aviva and it is working out at about 82euros a month which I'm thinking is pretty dear. Any recommendations on who is competitive at the moment? Its one of those policies that grows each year. Got a serious illness policy too and that has increased to about 80euros a month. Thinking this is a waste of money. Feel totally ignorant in regards to understanding it all and feel am being ripped off. Any advise greatly appreciated!

I guess it depends on the value of your current mortgage but you are legally permitted to shop around!

ferga_com

Rosie30 wrote: »

In a bit of a dilemma.... Have mortgage protection with Aviva and it is working out at about 82euros a month which I'm thinking is pretty dear. Any recommendations on who is competitive at the moment? Its one of those policies that grows each year. Got a serious illness policy too and that has increased to about 80euros a month. Thinking this is a waste of money. Feel totally ignorant in regards to understanding it all and feel am being ripped off. Any advise greatly appreciated!

I think that before you go shopping around for other policies, you first need to establish what cover you actually need. Obviously you need your mortgage to be cleared off in the event of death. Anything else is optional. The need for cover will be determined by various factors, including your income and outgoings, whether or not you have any dependents, what other assets/savings and liabilities you have. A good broker should go through all of this with you and come up with a recommended level of cover that you understand. If you're paying nearly €2,000 a year for cover, you should certainly know why you have that amount.

There's no one company that's cheapest across the board. Different companies compete for different segments of the market, e.g. older males, younger females, non-smokers etc. Shopping around is vital. Companies that should be on your list include Aviva, Caledonian Life, Friends First, Irish Life, New Ireland and Zurich Life as these compete for life cover business.

Hope this helps. Regards, Liam

Kennie1

Rosie30 wrote: »

In a bit of a dilemma.... Have mortgage protection with Aviva and it is working out at about 82euros a month which I'm thinking is pretty dear. Any recommendations on who is competitive at the moment? Its one of those policies that grows each year. Got a serious illness policy too and that has increased to about 80euros a month. Thinking this is a waste of money. Feel totally ignorant in regards to understanding it all and feel am being ripped off. Any advise greatly appreciated!

It may be worth considering changing to a "reducing term assurance (RTA)" policy. This type of policy just pays off your mortgage and nothing more. Then depending on your financial circumstances you may want/need to take out personal life cover as well. With RTA there is not much difference in price between different providers. One thing I would always consider is claims experiance with different companies and which company gives the best service and quickest turn around time for claims, this can often justify paying that little bit extra especially when it comes to serious illness cover.

As for the serious illness cover, different companies have different definitions for the illness that they cover, some companies cover more conditions than others so you would need to speak to an advisor about the right policy for you. I do know that a lot of companies have reviewed the list of conditions that they cover and have increased the number of covered conditions as well. One that I know of is now covering up to 47 listed conditions where as 2 years ago they were only covering 26 and would you belive that the cost is actually less now!!! To answer your question, like all insurance if you are lucky enough not to have to use it, its the biggest waste of money ever with the benefit of hindsight, but you have to remember that 4 out of 10 people gets one of the listed conditions before the age of 65. Income protection is becoming very popular as an alternative these days with more and more life companies offering this product now so you may want to consider this?

Rosie30

Great advice guys...appreciate it. Its such a vast industry that I know quite little about. I suppose its finding an adviser that you can trust. Will be making appointments galore with brokers to find the best options! Thanks a mil.