Life Can I cancel life insurance on RIP against bank wishes?

nbc

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Hi,
I have an investment property and am paying life insurance of E25 per month. I am trying to cut costs and hope to cancel it as I am told it's not critical on residential properties. I rang IBRC and they are refusing to give me permission to cancel the Irish life policy.
Question- Can I just stop the direct debit anyway? What are the consequences? The outstanding mortgage is in 2 parts- a small balance representing the original mortgage and an interest only portion of E40000. I am nervous they will change the interest only portion to repayment if I annoy them too much- I have had it for 9 years and they have never asked to change back although it was originally only for 5 years.
Many thanks
Niall
 
They cannot force you to take out Life Insurance on a Investment property mortgage. They can on a Home mortgage. That is definite.
 
Technically if you cancel the policy you are likely to be in breach of the loan conditions. (Dermot's comment above only relative to a new facility). There is a risk that the Bank could call in the loan on foot of this breach. The bank will be advised of this change and given that you are over term on your interest only repayment agreement, I would be inclined to leave things stand. You may be creating a problem for yourself in drawing attention to this loan now!
 
Keep your policy, in the scheme of things the cost is minimal, I am directly involved in a case where an investor cancelled all policies for the same reason...that is cost as yourself, that person within six months passed away from an illness they had no awareness of when they cancelled their life cover, the creditors are unsympathetic and the knock on for the persons family will continue for some time.

Be sensible save this sum elsewhere if you can do that by addressing all other costs in your life, essential and non essential costs and be ruthless with any discretionary spending.
 
As a point of note I fail to understand as to why the Bank requested a Life Policy being taken out on an Investment property. If it was your PPR and as already stated Life Assurance is essential, but not a requirement for an investment.

I think the Bank may have been out of order if they requested a Life Policy in this instance. Simply write to the Bank outlining your intentions and await for the reply.
 
Because in theory the property can be sold to clear the loan if person dies as it is not the family home.

Banks have differing policies, even though there is no legal requirement for them to have life cover in place on a BTL, some may make it a condition of the loan offer.
 
As Webbs says check your loan offer, I think it sensible to try and include life cover on all borrowings, whilst not essential on buy to let's it was probably a condition on this loan.
 
Consumer Credit Act 1995

I think it would be very foolish to cancel a Mortgage Protection Policy and like Palerider have seen how this can go so bad for the surviving family.

That said a bank cannot make it a condition of an investment mortgage to take out a MPP as per the Consumer Credit Act 1995 http://www.irishstatutebook.ie/1995/en/act/pub/0024/sec0126.html#sec126

The following is taken from the FSO report [broken link removed]

I received a complaint that in 2000 the Complainant and his wife took out a mortgage to purchase a residential investment property. The Loan Offer stated that mortgage protection was required as part of the General Conditions of the loan. The Complainant queried at the time whether such protection was compulsory for a mortgage where the purpose of the security offered was not the family dwelling. Indeed, he stated that the FSP wanted a policy for both the Complainant and his wife. When this was queried, a policy in his name alone was accepted by the FSP reluctantly and as a concession. The Complainant stated that he was given no option but to take out the policy as the loan was contingent on it and it was clearly stated by the provider at the time that this was in fact compulsory for all mortgages.

In 2005 the Complainant discovered that thisinformation was incorrect as it is clearly provided under the Consumer Credit Act 1995 - section 126 (2) (1) – that mortgage protection policies are compulsory only for private dwellings. On bringing this to the FSP’s attention, he indicated that the FSP, with some reluctance, terminated the policy. He then sought a refund of the premiums he had paid with some interest but the FSP was not amenable to it. He then referred the matter to me. Following further correspondence between the FSP, the Complainant and this office, the matter was settled to his satisfaction. Accordingly, I did not have to carry out a formal investigation of this complaint.

It seemed to me, however, that this could be an area where a systemic issue could arise, not alone for this FSP, but for other FSPs. My concern was whether all commercial lending was subject to this type of mortgage protection policy when in fact it was not necessary. I fully appreciate and understand that certain conditions will apply to investment properties, be they a house or otherwise. I communicated with the Financial Regulator as it may be appropriate for the Regulator to carry out a general review of all FSPs to establish whether mortgages on investment properties (particularly houses) were inappropriately subject to a requirement that a mortgage protection policy be taken out

So perhaps the OP would like to make a formal complaint based on the above as long as the policy has been take out in the last 6 years (statute barred time frame).
 
.... The outstanding mortgage is in 2 parts- a small balance representing the original mortgage and an interest only portion of €40000. ...

I am wondering if this is perhaps relevant? Maybe the property was originally purchased as a PPR and the "original" mortgage part still has a contractual requirement to have a protection policy?
 
The bank shouldn't have requested life cover in the first instance. Was there an equity release from your home to buy it?

As other advised, I would be slow to cancel life cover, especially one for €25 a month. Is the property in negative equity? If so, I would definitely keep it as you don't want to leave others with a financial mess to clear up. Can you not cut €6.25 a week out of your weekly expenditure?



Steven
www.bluewaterfp.ie
 
.

I am single with no dependents. I have no interest in what happens once I'm shoving up the daisies to be brutally honest. As it happens if I did die there would be sufficient funds to clear all debts and a reasonable amount left over anyway- certainly enough for my nephews and nieces to go on the **** for several months!
Property is not in negative equity either.
nbc
 
It all comes down to what the contract says then. Baracuda has shown that the Ombudsman has looked at this previously. If they won't let you cancel, refer to this case and see what their action is.

Just re-reading your original post, have you checked with Irish Life as to whether the policy is assigned? While mortgage protection was required when taking out mortgages during the Celtic Tiger, the majority of them were never assigned. If yours wasn't, you can cancel it and IBRC wouldn't know.


Steven
www.bluewaterfp.ie
 
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