Life My Life Policy Is Worth More Than The Loan I Took Out

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Alwyn

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When I took out my mortgage I assigned my life policy to my lender. Some years later I remortgaged and was again asked by the lender to take out a new life policy for a higher amount and assign it also to them which I did.

I happened to be going through some paper work the other day and realised I should have initially canceled the origional policy as the second policy I took out would on my death have paid my mortgage three times over.

I canceled the direct debit and now the bank aren't very happy and want it reinstated immediately.

Why should I pay for a policy that is three times the amount of the loan I took out?
 
Which one have you cancelled the direct debit for? Bank should be happy once the loan is covered so if you have cancelled the initial policy then the second one should be sufficient.

While you dont have to pay for a policy three times your loan, however if anything had happened to you the total amount would be paid out so if you have dependents they would benefit.
 
The bank may not have their interest noted on the new policy or even be aware of it, that might be why they are insisting on reinstatement of the old policy.

Under the Consumer Credit Act you are obliged to have life assurance cover in force sufficient to clear your mortgage on your principal place of residence in the event of death. Once your new policy has sufficient cover then there is no reason for you to have a second policy if you dont want one.

Call the lender and ask for a new deed of assignment, complete it based on your new policy details and return it to them along with your policy document. This should keep them happy as their interest can then be noted on your new policy.



www.CheaperLifeAssurance.ie
 
Life Assurance assignment


Hi Boomtobust,

My first question is, did your bank arrange the life assurance policy? If yes, there is a good chance you may be overpaying on your premium, as you are entitled to source your life cover through any company, therefore get the best from the market. There is a big difference in price between some companies, so its worth looking at the cost again.

Regards, your current mortgage, as per the previous post, just ask the bank for the assignment details and give them your original policy document, if required. Some lenders will be happy with a copy of your policy also, so just ask the bank first.

You may then keep the second policy as personal cover or cancel if not required, however if your health has changed recently be careful cancelling policies, as they may be offering good cover, compared with market prices today. Get an independant financial adviser to look at your options for you.

Hope this helps
David
 
Why doesn't anyone tell the chap to see if the existing policy can be altered rather than taking out a new one??
 
Good point Sumatra.

Although as he/she is considering his/her options it might prove to be a suitable time to shop around.
 
The second policy is already taken out. Anyway usually if you want to alter a policy you have to reapply as though it was new one so same difference really.
 
I think I know what may be going on...Your old policy was assigned to the lender and when to took out the new policy this one was also assigned to the lender. The lender never contacted the life company to say that they no longer had an interest in the original policy. When you canceled the DD for the original policy the life company sent a letter to the lender to say that they could not collect the premium's. When you assign a policy to a lender they then become the policy owner and that is why the life company is sending the cheque to the lender. You need to go into your lender and explain to them that you already have a policy in place and that you need a deed of release for the old policy and this should sort it out.
 

This is exactly it. Apologies for not making myself clearer in the opening post. I contacted my lender today and they had apparently received the pay out. I asked them to put the payment off my mortgage or return it to me. The teller said they would have to speak to the manager. I'm still waiting to hear.

Thanks everyone for your replies.
 
No not at all. It happens... but if you pay 2 health insc by mistake you can claim the amt you have paid to one of the companies back... not sure if this is the case with life insc as you can have 2 active life policies.
 
No, you will not be able to claim the amount paid back because if you had died then both policies would have paid out. Only reason to get payments back was if you had instructed them to cancel it and they had not.
 
Wbbs, am I entitled to ask the lender to refund me the pay out cheque they received when I canceled the policy?
 
Boomtobust said:
Wbbs, am I entitled to ask the lender to refund me the pay out cheque they received when I canceled the policy?
Click to expand...

If there was a value attached to the policy then yes you are entitled to ask for it back once there was always cover in place for them which it sounds like there was.
 
If the policy was assigned to the lender then they effectively own it and that includes the value of the policy. If that is the case then you are not entitled to the proceeds.
 
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