Live assurance mortgage question

car

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Couple I know are renting. They recently married. she used to have part ownership of a house with her sister. the sister bought her share off her when she got married herself. the sisters would have had life assurance with that mortgage.

When she bought her out, her sister advised her she might be better to keep the life assurance policy as she suffers from depression and is on medication and may not qualify for life assurance if she cancelled and applied later. (guesswork there, whether true or not)

Now the renting couple are looking for a house, I was suggesting she may want to cancel the current LA policy to maxmise any savings so 2 questions here

1. would any current medication jeopardise the ability to get life assurance which in turn would jeopardise the chances of getting any new mortgage (I understand its all relative to the situation) is there a general rule of thumb on that as to what medical conditions would govern decision on the granting of an LA policy that they could look up?

2. if she was unable to take out a new policy, would the current life assurance policy qualify instead as its for roughly same amount as what theyre going for, so she'd be better to keep it going?
 
Car, I cannot answer all your questions but from personal experience re life insurance I applied for same at a later stage of life ie 50. At that stage I had a condition, not life threatening, but on medication. I did get it but was severely loaded insofar as it was three times more expensive than normal rate. So I would say hold on to the cover you have, which I presume you have since before going on med.
 
yes, Ive read this online since posting that while there generally doesnt seem to be any problem getting LA if you have an existing non-life threatening condition, theres a possibility it may be loaded which they'd only find out at application time depending on what the actuaries say after seeing the medical report from GP, which is fair enough.

So then the second question comes in, when you take out a mortgage the bank requires you to take out mortgage protection for the sum of the mortgage which would obviously decrease over time. If you have a life assurance policy for at least that amount, can that take the place of the mortgage protection policy?
 
Banks actually would prefer Level Term Assurance to Reducing Mortgage Protection as there is higher cover over the full term of the mortgage. Mortgage Protection is usually a bit cheaper as the cover reduces.
The existing policy cannot already be assigned so she will have to make sure that the original banks name is removed. The cover must be for at least what she is now borrowing and the term must at least have as long to run. i.e. if if she is borrowing €200k now over 20 years and the existing policy runs out in 17 years then the new bank will not accept it.

She could always apply for life cover again and only cancel the existing plan if she has been accepted. Underwriters can load depression of between +50% to +150% depending on whether a person was ever an inpatient and if there are any other conditions. Some are not rathed though so no harm in applying anyway.
 
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