Compulsory Life & CI Insurance - Is This Legal?

Alligator1

Hi,

My friend has asked me to look in to whether she can claim any insurance money back on a business loan she took out 12 months ago and I wondered if anyone on this board can advise me?

She took a business loan for £220k to pay off her then mortgage, buy out her ex husband and put some money in to expanding her business. Lloyds TSB said they were willing to give her the loan but said she had to take out life and critical illness insurance with them. :mad:

I have read all the documents including the KFI and it says that they will advise on insurance products only from their own range and make a recommendation based on her needs.

There was and still is more than twice the equity in the property to pasy off the loan in the event of death and CI so my friend said she did not need this as she has no dependents but was told it was a condition of the loan. Does anyone know if this is legal?

Secondly, the loan she took was only over a 2 year period as she is currently selling parts of the property as building plots and paying all the money from the sale of these off the loan. However, the insurance policy they sold her was for a 20 year period. So if she keeps the loan for the full 2 years and then has finished paying it she will be paying for 18 more years of insurance that she has no need for and never wanted.:mad::mad::mad::eek:

Hope someone can help me work out if this is legal and if we can submit a claim for her

Thanks in advance.

I have also posted this on the ppi reclaiming board although all the claims on there seem to be for ppi rather than life insurance.

dacouch

Did they tell her it was compulsory to have insurance or compulsory to have it through them?

somewhatnew

the lender can request some kind of security such as life / critical illness / income protection as part of their lending requirements - no problem there at all.

what they cant do is force you to take it with them... thats called conditional selling and its deemend to be very, very naughty and was outlawed years ago

if they have sold her a 20 year policy for a 2 year liability then ask them to jusify their reccomendations - i.e. why?, then complain because it will be a load of tosh, get a refund for the over charged premiums (20 year cover is far more expensive than 2 year cover), and refer it onto the ombudsman if you dont get any joy. some bank dude has just earned a nice comission on that one.

Alligator1

Hi,

She was told that it was compulsory to take it but nowhere in the documents does it say this at all.

When the guy from Lloyds TSB came for round with all the loan docs for her to sign he brought with him someone else from the bank who I assume must have been one of their insurance advisors who said that is was a condition of the loan to take this out.

Hmmm, he got £5200 commission from the sale of this policy so no wonder he was so keen to get her to sign!!

dunstonh

he got £5200 commission from the sale of this policy so no wonder he was so keen to get her to sign!!

no he didnt. Lloyds dont pay their advisers commission. They have targets and bonuses based on those targets (its indirect commission in a way). However, the Lloyds remuneration method actually pays more for longer term policies than shorter term. So, that is your reason why the 20 year term was recommended and not 2 years and why I highlighted that point on your duplicate thread.