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Original poster

Can somebody please tell me whether you HAVE to have life insurance on all mortgages?

24 replies

Wisteria · 06/04/2008 17:29

Partner's father passed away 10 days ago and they all seem to think that his wife will still have to pay the mortgage, which she's worried about - I always thought you had to hold insurance to pay the mortgage off in the event of your death but am not sure of my facts so don't want to say anything.......

help me - oh wise MN financial people!

OP posts:
ScienceTeacher · 06/04/2008 17:31

I thought you had to - we have in our mortgages.

Perhaps their mortgage was taken out before this was a requirement.

Condolences on your loss.

Original poster
Wisteria · 06/04/2008 17:32

Thanks ST - it's a relatively new mortgage, only bought the house in 2000.

I know we've always had to have one.

OP posts:
uptomyeyes · 06/04/2008 17:33

You need life insurance to take out a mortgage - but nobody checks thereafter to see if you have kept up the policy.

CarGirl · 06/04/2008 17:34

If it is a repayment mortgage you do not have to have insurance, if it were interest only or endowment (unlikely) than you do have to have insurance.

Original poster
Wisteria · 06/04/2008 17:35

Oh - well I would have thought he would have kept it up, so who do I ask - DP can't find any kind of paperwork....would the mortgage company know who the original policy was taken out with do you think?

OP posts:
TheFallenMadonna · 06/04/2008 17:35

Do you have to?

Although we set up new life insurance when we took out a new mortgage, the insurance took a while to organise (extra questionnaires etc) and wasn't in place before we completed. Which was somewhat worrying.

BrownSuga · 06/04/2008 17:35

Sorry for your loss.

I don't think it is a requirement, maybe depends on the type of mortgage, how much it's for, your individual circumstances etc.. We don't have it on our mortgage, so I took out a separate policy to cover it and some change, when we had DS.

cluelessnchaos · 06/04/2008 17:35

Most mortgage providers ensure you take out adequate insurance for covering the loan, but some, if it is an endowment then it is coupled with a life assurance policy to pay off the sum on maturity or death.

Original poster
Wisteria · 06/04/2008 17:36

Aha!! Cheers cargirl, that sheds some light on it, I will do some digging in the paperwork.

OP posts:
cluelessnchaos · 06/04/2008 17:36

The mortgage provider should have the details of the insurance policy, or else did he use an ifa to take out the policy, they would have a record of it

Millarkie · 06/04/2008 17:37

We don't have to have insurance on our mortgage (although we have chosen to take out a policy anyway).

Original poster
Wisteria · 06/04/2008 17:38

And therein lies the problem - the widow knows nothing about any of it.....why don't people discuss these things before they go? It always astounds me................

I will have a rifle through the briefcase now - thank you all for your help

OP posts:
Iota · 06/04/2008 17:41

If you take out a mortgage in your sole name, and don't have dependents, you don't need life insurance.

CarGirl · 06/04/2008 17:42

same here milarkie. It was quite funny as the insurance bloke wanted us to take out cover for more than our mortgage but once I showed him (again) that if either of us were widowed and didn't have a mortgage to pay then we would be financially better off he conceeded defeat in selling us something we didn't need!

LIZS · 06/04/2008 17:43

According to dh (who has worked in Life Insurance and Mortgages in past)it is possible that the lender would n't have insisted upon a policy since their security is the house. They may have been strongly recommended to take some out but chose not to at the time. In the past life policies have been assigned to lenders so that in such an event the mortgage is paid off directly but that isn't always done now so she may get a sum from a policy as beneficiary but decide not pay it off. However the terms of their mortgage may well be that in the event of one of the borrowers' deaths the mortgage becomes repayable or renegotiable. hth

SueW · 06/04/2008 17:47

In the old days (when I worked in a bank) you did have to take out life insurance. The policy was assigned to the bank (in a similar way that your buildings insurance will note who has the mortgage on your property - well mine does anyway and it isn't arranged by the same financial organisation).

If payments were bounced by the bank or cancelled by the borrower, the insurance company would inform the mortgage company that there was no longer life cover on that mortgage and the mortgage co would contact you to find out why/whether you had arranged cover elsewhere.

But that all seems to have gone by the wayside now. After all, for years there's been a property boom and the lender can just re-possess your property and sell it if you die/become redundant/can't pay the mortgage.

Helennn · 06/04/2008 17:48

Is it possible to see your partner's father's bank statements? I would have thought there would have to be a direct debit going out to pay the life assurance - you could probably trace it from there.

eandh · 06/04/2008 17:50

No it is not a legal requirement, in fact, many of customers at my work (bank) either do not have enough or none at all.

DH has a heart problem that makes our life insurance expensive, in fact the only way around it was by having an endownment with built in life insurance (and a slight risk that endownment wont cover the interest only part of our mortgage however as mortgage is due to end when I am 45 and he is 49 if there is a shortfall we'll just pay that shortfall off over another 5 years) when we moved we increased mortgage by £20k but couldnt get him any extra life insurance cover so god forbids he dies I will have a £20k left on mortgage to pay. However if I die he will have mortgage paid off and a lump sum as additional insurance for me was less that £7 per month.

Mortgage company may know if they took a policy out at the time but not necessarily have all the details, most people by by direct debit so have a look on bank statements for any amount being debited to a life company (remember places like direct line/tesco/norwich union etc all do insurance so it may not be obvious)

Lilymaid · 06/04/2008 17:51

DH and I have had repayment mortgages for nearly 30 years and have never been required to have life assurance as a condition of granting the mortgage.

eandh · 06/04/2008 17:51

whoops x post with some others there

Original poster
Wisteria · 06/04/2008 18:29

I've just been through all of his sole account statements and there's nothing I can't identify as something we already know about - It's possible there's something on the joint account but FIL's widow has those so I will have a look at those as well. I think I'm going to contact the mortgage provider and IFA tomorrow.

Many thanks again for all your help (am very grateful that you took the time to post). I think Lizs suggestion is probably the case, that he held life insurance completely separately and she will have to decide what to do with it...he was a fairly financially astute individual so I would be amazed had he not had adequate provision for his wife .

OP posts:
HappyMummyOfOne · 06/04/2008 20:05

Most lenders dont make insurance compulsory on a joint mortgage as the remaining partner just becomes liable to continue with the payments.

Bank statements should show a monthly payment to the life company if he had separate insurance.

SueW · 06/04/2008 23:19

It's not easy, is it?

We no longer have life ins linked to our mortgage because we changed our mortgage lender and have adequate provision elsewhere and it wasn't a condition of the mortgage. We certainly weren't change it when we are older and the premiums are higher than what we already have!

Even as someone who is reaonably financially savvy and is responsible for household finance I dread dealing with the financial stuff if DH dies. If I die first, DH won't have a clue.

Flibbertyjibbet · 06/04/2008 23:38

I have a repayment mortage with no life insurance/assurance as I was single and childless when I bought it. I was also very skint and resented the sales man telling me I needed to fork out for something that would benefit other people if I snuffed it!
No requirement for repayment mortgages to have insurance.
We dont' have insurance now as we are still in my house, the repayments would be manageable on one salary but proceeds from other insurances would probably cover it.

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