Paying Mortgage Life Cover for a Mortgage we no longer have...

Merku · 22-02-2012 01:45PM #1

Hi!
I hope this is the correct forum to ask this question.

My wife and I took out a mortgage with ICS in July 2004 to buy our 1st home along with a Life Cover (covering the mortgage in case one us died) with Hibernian that our broker took care of organizing with the mortgage.
After a year, when it was time to renew, we decided to shop around and remortgage (I wish somebody slapped me at the time and told me it was a stupid idea but that’s beside the point:rolleyes:) to get ride of some personal loans. We got this new mortgage with EBS in May 2006. They took care of transferring the mortgage and gave us a new life cover to go with it.
Carelessly (and stupidly) we thought they would take care of ending the previous life cover with Hibernian.

You probably see now where am going with this: we are still paying the life cover with Hibernian while we have one with Friends First for our EBS mortgage.
We only realized this earlier this month while going through our finance with a financial advisor.
The reason we only noticed the direct debit now was that we thought this direct debit (now Aviva) was actually a cover on our EBS mortgage but going through our details from EBS and Friends First, we saw that we were covered elsewhere.
Made us feel very stupid to say the least. To be perfectly honest, life cover, mortgage protection, life insurance and the rest were never really explained to us at the time and although I know we should have cared a lot more, we didn’t question it enough and we kind of mixed everything up, didn’t know who was providing what and what was actually covered.

So basically, we have been paying €25.00 per month for the last 6 years for nothing. We have now stopped the direct debit but we are wondering if we have a case to get some or all of that money back.

The small print on the Hibernian contract states that we have to inform them of any changes on our policy so I guess they have covered themselves in this way. But another small print states that they have to inform us every time the cost of the policy changes. It actually increased very slightly (about 50cents) from the start of the policy. We never got as much as a notice, nor have we got any statements (or any correspondence for that matter) ever since we took the policy with them 8years ago.

So it looks to me that they knew they weren’t covering our mortgage anymore but still kept taking the money every month regardless.

We have contacted Hibernian/Aviva and they are sending us a statement. The guy wasn’t very friendly on the phone to say the least and said they had no record of us cancelling the policy so they kept taking the money.
ICS and EBS have been no help whatsoever.

Do you think we have a case and how would you go about it if you think we do?

Henry Ford III · 22-02-2012 04:28PM

No chance. You had cover (more than you needed but you still had it) and paid for it.

Had there been a claim there would have been 2 payouts.

phormium · 22-02-2012 05:59PM

As above, not a hope. You did have cover and if you had died it would have paid out, the fact that the mortgage was paid off is neither here nor there, the policy would still have paid out to the estate. No one could have cancelled that policy but yourself, the bank could not do it on your behalf, it is just unfortunate for you that you did not notice it for all that time. However on the bright side you didn't die but if you had your dependents would have had more than you expected them to have.

Pablo Sanchez · 22-02-2012 09:37PM

You wernt paying for nothing, both policies remained valid all this time.

And your premium rose by the 50 cent as the government imposed a 1% levy in the emergency budget of 2009.

Merku · 23-02-2012 03:04PM

I thought the policy was tied to the life of the mortgage and because that mortgage wasnt there any more, the cover didnt apply anymore. I guess i need to read more about this.

I still find it hard to believe they would have paid out as our new mortgage was a lot more than the old one and the cover was based on the old mortgage.

seamus · 23-02-2012 03:17PM

Merku wrote: »

I thought the policy was tied to the life of the mortgage and because that mortgage wasnt there any more, the cover didnt apply anymore. I guess i need to read more about this.

It is, but there's no "background" link between the two. You can cancel your life cover without affecting your mortgage and you can pay off your mortgage but it won't stop your life cover.

I don't know very much about insurance, however it would be worth investigating the idea that you were paying a premium on a policy that could never be realised. The policy you had was for the mortgage you took out with ICS. If either of you had died, your insurer would have noticed that you no longer held this mortgage and would not have paid out.
Therefore they were taking a premium despite not providing any cover.

I'm not sure if this is a consideration though, and the fact that the onus is on you to inform them of changes puts them on a better footing.

StillWaters · 23-02-2012 03:34PM

seamus wrote: »

I don't know very much about insurance, however it would be worth investigating the idea that you were paying a premium on a policy that could never be realised. The policy you had was for the mortgage you took out with ICS. If either of you had died, your insurer would have noticed that you no longer held this mortgage and would not have paid out.
Therefore they were taking a premium despite not providing any cover.

Of course it would have paid out, just to the Estate not ICS, the Bank's interest is noted on a insurance policy, and if there is a mortgage outstanding, it is paid off, if not, it is paid to the Estate.

ROSSKI · 23-02-2012 03:40PM

So does that mean (God Forbid) that if one of them passed away that both insurance companies would have paid out - Say you had a morgage for 200k would they pay 200k each or 100 k each?

StillWaters · 23-02-2012 03:59PM

If you are insured for €400K, thats what will be paid, regardless of your level of mortgage, or how many policies you have out.

Of course some people do choose decreasing level insurance, so the level of insurance paid out will more or less match the mortgage outstanding.

To the OP, you have no case at all.

seamus · 23-02-2012 04:04PM

StillWaters wrote: »

Of course it would have paid out, just to the Estate not ICS, the Bank's interest is noted on a insurance policy, and if there is a mortgage outstanding, it is paid off, if not, it is paid to the Estate.

The OP is (according to his post) talking about the mandatory mortgage protection insurance which you get when you take out a mortgage. Most young people buying a first property take out mortgage protection cover and not full life cover.

The cover provided by such a policy only covers the mortgage value on the property and usually only covers a very specific mortgage (identified by the lender and amount). If the mortgage is gone but you continue paying the premium, the insurance will not provide any payment on death as they are only obliged to cover the outstanding mortgage amount of that specific mortgage.

Merku · 23-02-2012 05:19PM

seamus wrote: »

The OP is (according to his post) talking about the mandatory mortgage protection insurance which you get when you take out a mortgage. Most young people buying a first property take out mortgage protection cover and not full life cover.

The cover provided by such a policy only covers the mortgage value on the property and usually only covers a very specific mortgage (identified by the lender and amount). If the mortgage is gone but you continue paying the premium, the insurance will not provide any payment on death as they are only obliged to cover the outstanding mortgage amount of that specific mortgage.

Thats the one.

Am not dreaming about getting any money back to be honest. I wouldnt be so lucky!

My grievance is that we never got as much as an ad in the mail from Hibernian/Aviva for the last 8years, nevermind a statement. It's one of the reason the alarm bells didnt ring that we were paying for 2 policies including one on a non existing mortgage. The amount also increased during the 8 years and they are obligated to send us a notice for any changes.

Merku · 23-02-2012 05:21PM

seamus wrote: »

I'm not sure if this is a consideration though, and the fact that the onus is on you to inform them of changes puts them on a better footing.

This actually should work both ways. They should inform us of any changes too and they havent done so.

rainbowtrout · 23-02-2012 05:40PM

Merku wrote: »

This actually should work both ways. They should inform us of any changes too and they havent done so.

Well it could be that the cost of the policy hasn't changed but the government levy has. They are not increasing the cost of the policy, the government are imposing a charge on you.

The bank require you to have this insurance. They are noted on the policy, the insurance company don't know that you switched mortgage providers unless you tell them.

Pablo Sanchez · 23-02-2012 06:44PM

If you have a decreasing policy then no correspondence will occur unless there is some problem with a missed premium. You dont hear from your car insurance company during the term of your policy, it just so happens that a life policies term may last for decades.

Both policies would have been paid full stop.

The only occasion where you may have some come back would be in the event that your original policy was part of the banks group scheme, in that case its likley that the cover would actually not be valid if you no longer hold the mortgage. However as you pay it yourself via direct debit, this tells me that it is an individual policy and not part of a scheme.

The life insurance company does not care if you have a mortgage or not. Your contract with them states that company x will pay policyholder y in the event of death. The mortgage is a matter for you and your bank, it will not affect if it will be paid or not, only who it untimatly would be paid to.

On death when its apparent that the bank no longer should hold an assignment over the policy, the payment would simply be paid in the deceased's estate.

phormium · 23-02-2012 07:03PM

It would have paid out, wouldn't matter whether it was decreasing, level, or any other type. Mortgage protection policies are taken out to cover a mortgage yes, but if that mortgage no longer exists when the claim occurs then it still pays out, it just means there is no mortgage to be paid out of it.

Decreasing policies are based on the way a mortgage would normally go down over the years and the policies decreases accordingly, however these two amounts do not always match, they both go down in parallel universes but not tied to each other. For example if you died with arrears on your mortgage there is no guarantee there would be enough in the policy to clear the full mortgage, it will only clear where you should have been had you kept up the correct payments. Same way if you have paid a lump sum into your mortgage and it was e.g. 10k below where it would normally have been then there will be a surplus if the life cover is called on.

There is no case here, you did not notice you were still paying it, you should have. You had a valid policy all these years.

Paying Mortgage Life Cover for a Mortgage we no longer have...

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