€40,000 left on mortgage, mortgage protection still required?

S

Springers

Registered User
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Afternoon All,

I pay €15 monthly in a block mortgage life Insurance plan with Irish life.

€40,000 left on mortgage. I have €25,000 in savings and a work life Insurance that is 4 times my annual salary (€ 220,000)

I came across this https://www.citizensinformation.ie/en/housing/owning_a_home/buying_a_home/mortgage_protection.html

You do not have to take out mortgage protection insurance if:
  • You already have enough life insurance to pay off the home loan if you die

Am I legally allowed to cancel this block mortgage life Insurance of €15 as I have already a work life Insurance that would cover the balance left?
 
Whatever about the legality of it (and your mortgage contract probably stipulates that you need mortgage protection), the level of life assuarnce you need depends on how your dependants will cope in the future if you were to die today
 
jpd said:
Whatever about the legality of it (and your mortgage contract probably stipulates that you need mortgage protection), the level of life assuarnce you need depends on how your dependants will cope in the future if you were to die today
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Thank you for your response.

I am not a native speaker so I am not sure I got the meaning of your reply. Did you mean I should focus on the level of the mortgage life assurance rather than finding a way to cancel it? If it's the case, the policy only covers the remaining balance (€40,000). So I don't think this is worth it as we both work full time (with a kid) with no debts except the mortgage and also got work life insurance. unless I'm missing something?
 
That bit in Citizens Info refers to someone having an existing policy that covers the mortgage however most lenders want the policy assigned to them and work related life cover cannot be assigned to a bank/lender so if your lender wants the policy assigned to them and most do then you couldn't use the work policy. It would state in your original loan offer whether policy was to be assigned or not.

That said it's not an awful lot of money to be paying each month for the cover and equally if you cancelled the direct debit there is unlikely anything will be done about it by the lender other than sending you a letter saying you 'must' have mortgage protection. That won't work of course if the 15 is being paid combined with the mortgage payment.

So if you really need and can't afford the 15 then try cancelling but if you can afford I'd keep it and just means your dependants will have bigger amount available to them if anything happens you.
 
I had a similar mortgage balance to the OP, and with 3 years to go, i cancelled the mortgage protection, allthough , i did this knowing, i would be clearing the full mortgage balance one 18 months later.

Banks do periodic random checks on this, to see if you have both building & life insurance in place, but it tends to be irregular timeframes.

From the banks perspective, they require themselves, to be named on both the Life Cover policy, and also the Buildings insurance policy, so as they are paid should the worst happen.
So, having a separate life cover is no use to a bank, unless they are named on the policy as an interested party on the policy.
 
@Monbretia and @fayf

seems like the wisest decision would be to keep the mortgage protection as I can afford to pay the €15.

I would however contact them to reduce the amount as the price was originally set up for an amount of €100,000.

Thank you all for your replies.
 
Hi Springers

Your €15 a month gives your estate a sum of money in the event of your death.

Normally, the amount insured goes down as your mortgage balance goes down.

However, if your mortgage balance goes down quicker due to earlier repayments, the sum insured does not go down.

For example, if you had paid your mortgage on schedule the balance on the mortgage and the sum insured today would be , say €100,000
But let's say you overpaid your mortgage and the balance is €80,000, the sum insured remains at €100,000.
So if you die, your mortgage will be paid off and your estate will get €20,000

1) Is the level of cover good value for €180 a year? Ring the insurance company and find out what the sum insured is. If you have only months to live, it's likely to be very good value. If you are a healthy 40 year old, it's probably not good value.

2) If you scrap it, there is very little that the lender can or will do. They will write a letter and you can just tell them you have plenty of life cover. In theory, they could take out life cover on your life and add it to your mortgage, but in reality, I doubt that they do for such a small sum.

Brendan
 
If it is a standard mortgage protetion policy, then the amount covered would decrease automatically as the capital owed reduced
 
Springers said:
@Monbretia and @fayf

seems like the wisest decision would be to keep the mortgage protection as I can afford to pay the €15.

I would however contact them to reduce the amount as the price was originally set up for an amount of €100,000.

Thank you all for your replies.
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Contacting them to reduce is probably pointless as more than likely there is a minimum premium and I wouldn't be surprised if it's not 15p.m. The policy will have been priced initially for the amount and term and be a fixed premium, they are unlikely to reduce it, the alternative is most likely cancelling it and taking out a brand new policy but you are older now and again you may get caught with a minimum premium anyway although you might get more cover for your 15 euro, that will all depend on age/health etc. I know when I took out my last policy years ago I went with an annual premium because it wasn't subject to the monthly minimum amount and I had cover for 120 pa that I couldn't have got for 10pm
 
15pm was the lowest anyone could quote me during a remortgage last year. Irrespective of the amount or type of policy.
 
Monbretia said:
Contacting them to reduce is probably pointless as more than likely there is a minimum premium and I wouldn't be surprised if it's not 15p.m. The policy will have been priced initially for the amount and term and be a fixed premium, they are unlikely to reduce it, the alternative is most likely cancelling it and taking out a brand new policy but you are older now and again you may get caught with a minimum premium anyway although you might get more cover for your 15 euro, that will all depend on age/health etc.
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Brendan Burgess said:
The amount covered would decrease in line with the scheduled reduction in capital -not the actual reduction.
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Indeed, I am currently paying €14.10 monthly. I called them and below the interesting points I got from the agent:

1- For €14.10 monthly, I am covered with the scheduled reduction in capital (around €90,000) and 13 years remaining.
2- The minimum premium is €13.50, but I should reduce the capital covered from €90,000 to €50,000
=> conclusion: a reduction of €0.60 monthly will reduce the amount covered of €40,000, Reduction is not worth it


Brendan Burgess said:
1) Is the level of cover good value for €180 a year? Ring the insurance company and find out what the sum insured is. If you have only months to live, it's likely to be very good value. If you are a healthy 40 year old, it's probably not good value.

2) If you scrap it, there is very little that the lender can or will do. They will write a letter and you can just tell them you have plenty of life cover. In theory, they could take out life cover on your life and add it to your mortgage, but in reality, I doubt that they do for such a small sum.
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I'm in good health and planning to pay off the mortgage in 6 months' time. I will call them tomorrow to cancel this insurance as it's not good value.
 
You have to keep it. Cancelling it is a breach of the terms of your mortgage. It is not expensive, so keep it.

Your work cover is written under trust and cannot be assigned against loans, so it cannot be used instead of the cover you currently have. W

When your mortgage is finished, you can cancel the cover if you want, until then, keep it.
 
Steven Barrett said:
Cancelling it is a breach of the terms of your mortgage.
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But so what? Are there practical consequences? Reading the thread above it doesn't seem so. The counterpart here is an entity here with a multi-billion balance sheet. It's not like you're thieving from your local Spar by cancelling life insurance in favour of a lender. There are no circumstances where the lender won't be repaid in full, and pretty promptly

Steven Barrett said:
It is not expensive,
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Lot's of things are inexpensive but that's not a good reason to keep it if you don't need it.

OP has insurance of double the outstanding amount and it about to pay off the mortgage. I can't see any reason to keep it if he has better uses for his money.
 
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Yes technically of course it is a breach of the terms and conditions but it will result in nothing happening from lender side, many many policies were lapsed and cancelled after 2008 when people couldn't pay and nothing happened other than the unfortunate ones who would have had a claim had they had a valid policy! It still happens.
 
Steven Barrett said:
You have to keep it. Cancelling it is a breach of the terms of your mortgage.
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NoRegretsCoyote said:
But so what? Are there practical consequences?
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If @Springers cancelled it now, would it not create an extra headache for their estate if they were to die before the mortgage is paid off in six months' time? I can imagine extra phonecalls and paperwork being needed.

For the sake of six months, cancelling now doesn't seem worth it. And something less serious than death may happen in the next six months that means that they do not end up paying off the mortgage in six months' time after all.
 
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