Mortgage Protection Insurance when overpaying mortgage

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gnf_ireland

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Quick question re mortgage protection insurance and overpaying the mortgage. I think I know the answer and am checking with the broker also, but just want to get some others understanding here in case the broker does not give me the answer I expect

Let say I have mortgage protection insurance on 100,000 mortgage over 20 years, and say the schedule associated on it shows that after 5 years the balance of the mortgage should be 90,000.

In the meantime, I overpay the mortgage and the actual balance after 5 years is 80,000.

The person passes away. My understanding is the mortgage protection insurance is paid into the persons estate and the estate needs to pay down the mortgage first with the funds - so 80,000 is cleared off. The remaining 10,000 is then left in the persons estate for distribution to the benefactors.

Is this correct, or does the insurance company keep the 10,000 euro just because ? I assume not, since it is in effect just a form of life assurance.
 
If the policy is assigned to a bank they are policy owners so in the event of a claim they would receive the €90,000. The bank would then keep what ever is needed to clear the mortgage and return the balance to the estate.

If the policy is not assigned then the full amount goes to the estate and the money may never get to the bank depending on other debts etc. Most banks would insist on an assignment for that reason.
 
gnf_ireland said:
Quick question re mortgage protection insurance and overpaying the mortgage. I think I know the answer and am checking with the broker also, but just want to get some others understanding here in case the broker does not give me the answer I expect

Let say I have mortgage protection insurance on 100,000 mortgage over 20 years, and say the schedule associated on it shows that after 5 years the balance of the mortgage should be 90,000.

In the meantime, I overpay the mortgage and the actual balance after 5 years is 80,000.

The person passes away. My understanding is the mortgage protection insurance is paid into the persons estate and the estate needs to pay down the mortgage first with the funds - so 80,000 is cleared off. The remaining 10,000 is then left in the persons estate for distribution to the benefactors.

Is this correct, or does the insurance company keep the 10,000 euro just because ? I assume not, since it is in effect just a form of life assurance.
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My understanding is that a mortgage protection policy is not affected by the actual amount of the Mortgage. It usually contains details of the benefit in event of death on or before a certain date on a reducing yearly basis. The lender takes an assignment over the policy and when provided with a death cert they will claim the proceeds as per the policy terms: clear the MortgAge loan and the remaining funds will remain in an account until claimed by the executor . There is no question of the insurance company keeping any funds.
 
trojan said:
My understanding is that a mortgage protection policy is not affected by the actual amount of the Mortgage. It usually contains details of the benefit in event of death on or before a certain date on a reducing yearly basis. The lender takes an assignment over the policy and when provided with a death cert they will claim the proceeds as per the policy terms: clear the MortgAge loan and the remaining funds will remain in an account until claimed by the executor . There is no question of the insurance company keeping any funds.
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Exactly!
 
Perfect - just checking ! This was also my understanding, with the exception of the assignment where it goes to the assignee and any balance returned to the executor on request/submission
 
gnf_ireland said:
Quick question re mortgage protection insurance and overpaying the mortgage. I think I know the answer and am checking with the broker also, but just want to get some others understanding here in case the broker does not give me the answer I expect

Let say I have mortgage protection insurance on 100,000 mortgage over 20 years, and say the schedule associated on it shows that after 5 years the balance of the mortgage should be 90,000.

In the meantime, I overpay the mortgage and the actual balance after 5 years is 80,000.

The person passes away. My understanding is the mortgage protection insurance is paid into the persons estate and the estate needs to pay down the mortgage first with the funds - so 80,000 is cleared off. The remaining 10,000 is then left in the persons estate for distribution to the benefactors.

Is this correct, or does the insurance company keep the 10,000 euro just because ? I assume not, since it is in effect just a form of life assurance.
Click to expand...
  • Just a small point in that if the surplus is substantial the lender will require sight of the Grant of Probate before releasing the funds. They will treat situation as if the deceased already had such funds in his account
 
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