Mortgage Protection

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Kelmar

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I have a question about Mortgage Protection Insurance. When I took out a mortgage about 16 years ago I was advised that I had to take out a Mortgage Protection Insurance Policy to protect the bank (AIB) I took out a policy where the initial sum assured was 400,000. Over the years I have managed to reduce the mortgage substantially (by making extra payments) to a point where I now owe around 35,000. However I am still paying 1,000 per year for this mortgage protection. The policy is with AIB Ark Life. Today I called them to see if the premium could be reduced in light of the fact that I now owe substantially less than I would have if I had not made extra payments. Their answer was that I had signed their "terms and conditions" at the time stating that the premium would reduce by 9% per annum and I could not now change that.

This does not sound fair or reasonable to me - anybody know if I have any grounds to either cancel the policy or have them agree to me paying much less in premium since the mortgage (and therefore the risk to them) is now much less?
 
Most of these policies are sold on a reducing amount basis, are you sure the sum assured is still 400k as if a straight forward decreasing mortgage protection policy then the amount assured would reduce in line with the loan, however the monthly premium remains the same. This is to even out the payments over the term of the mortgage, otherwise you would be paying huge monthly payments in early years. If you have a level term policy then 400k will always be the sum assured and while yes the bank are owed less than that any surplus will go to your estate so not always a bad thing either.

You can always take out a brand new policy now for the amount and term left and see if that is cheaper.
 
Kelmar said:
I have a question about Mortgage Protection Insurance. When I took out a mortgage about 16 years ago I was advised that I had to take out a Mortgage Protection Insurance Policy to protect the bank (AIB) I took out a policy where the initial sum assured was 400,000. Over the years I have managed to reduce the mortgage substantially (by making extra payments) to a point where I now owe around 35,000. However I am still paying 1,000 per year for this mortgage protection. The policy is with AIB Ark Life. Today I called them to see if the premium could be reduced in light of the fact that I now owe substantially less than I would have if I had not made extra payments. Their answer was that I had signed their "terms and conditions" at the time stating that the premium would reduce by 9% per annum and I could not now change that.
Click to expand...

What sort of a policy is it?
 
It just says "mortgage protection" under Policy type. It is with Ark Life and I am told the premium reduces by 9% per annum as part of the terms and conditions.

I did not realise that I can cancel and buy the cover from another company (forgive my ignorance but I thought it was part of the original mortgage deal I did with AIB)

I just got a quote online for cover on the reduced amount owing at 120 euro per annum versus the 1,000 I have been paying!!

Many thanks for you help!
 
Are you comparing like with like though? You need to check further what benefits are under the policy you have, it is quite possible you could get cheaper but the difference you have mentioned makes me think they are not the same.
 
I am in a similar position to Kelmar and was going to post the same question.
My policy is with Aviva but as I have been overpaying, I now owe less that expected. I was intending to cancel this policy if I got a lower quote elsewhere. However, I thought that mortgage protection was quite a basic thing - as in, you pay a premium and they pay off balance if you die.....is it not this simple? Are there other benefits?
 
Depends, there are different types, you get what you pay for, the most basic type does what you said but there are add ons and varying types that can have more benefits for more cost.
 
You may not be able to cancel a policy with out the mortgage lenders approval.
A lot of these policies would be assigned to the bank for the duration of the term of the policy and their permission is required before the life insurance company will cancel the policy.
 
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