Mis-sold life insurance with Mortgage - HSBC

Mr_Cus

I just found out that life insurance wasn't compulsory.

At the end of 2006 me and my partner got a mortgage from HSBC and at the time we were told that on top of the house insurance ( in case something happen to the house, fire, etc) we also needed life insurance in case something would happen to one of us ( death or critical illness ).

" Life Plan Flexi-Life & Critical illness Mortgage "

Since then we have been paying over 60pounds each, and this week we found ou through friends that we didn't have to.:mad:. Further web searches confirmed that.

Does anyone know if there is any chance of claiming this money back?

Thank you in advance.

bouncydog1

The bank would need to be sure that in the event of death or critical illness the mortgage would still need to be paid. Are you sure that in the terms and conditions you signed for the mortgage offer it wasn't conditional on effecting life assurance?

The alternative would be that the bank would re-possess the property in the event that the mortgage couldn't be paid.

Just because your friends weren't required to have it doesn't mean that the same would apply to you - you will need to revisit the original offer and conditions.

ExpertAdvice

I agree with the above. The legal requirement is to have buildings insurance only but lenders generally encourage you to take out life or life+CIC insurance to cover you for the worst. It assures them that their loan would be paid off plus it gives you peace of mind as well.

However, its not necessary that you have to take out the life insurance with the same bank as your mortgage since generally banks are most expensive when it comes to insurance compared to insurance companies.

Now it depends on how your mortgage adviser advised you. Most likely, your mortgage adviser would've been a tied adviser and he could only recommend HSBC insurance. Did he recommend you the life policy or did he say it was a legal requirment to have one. Also, it depends on what did the documents say that you signed at that time.

Also, each individual has different requirement. Therefore, just because your friends dont have life insurance doesn't mean that you shouldnt have it. You should assess your needs and decide accordingly. It may not be a good idea to cancel the policy altogether in a hurry. Shop around a bit and I'm quite sure you can find something cheaper. Life policies dont have any contract as such so you should be able to cancel it at anytime.

Mr_Cus

As for what the mortgage advisor told us, She made it clear that without the Life Insurance (with or without it being through the bank) it would be 'unlikely' that we would get the mortgage.
At the time my partner and i didn't want anything to stop us getting the mortgage so we reluctantly agreed.

Regarding having different requirements, to be honest, paying £120 a month when we cant afford it is more damaging than not having the insurance, we both have critical illness insurance through work and if it were to be death that would seperate us, with no dependents (we are two men) then each of us would have to deal with it at the time.

I have looked at the paperwork for the mortgage it seems like there is no reference to life insurance being required, i will look more closely tonight.

Thanks for your replies

weighty1_2

The problem is that whilst the mortgage broker may have verbally suggested that you would be unlikely to get the mortgage without the insurance was there anything in writing confirming this? The chances are the suitability letter drafted state that you WANTED to take life/cic to ensure your mortgage would be repaid in the event of either of these happening.

Also, are you sure you have cic through work? The reason why I ask is that you make no mention of any death in service benefit which is ordinarily the first type of group scheme that an employer would set up. I've only ever been involved with one company that had a group cic scheme and that was on a voluntary and contributory uptake basis.

Finally, if you can't afford the £60/month each now....(you know what coming here!).....then how would you afford the mortgage is you were seriously ill? I can appreciate that everyone has a budget that they have to work within, so why not speak to an IFA who could try and rearrange the cover without necessarily giving up all the benefits?

Lifes_Grand_Plan

I too took out a HSBC mortgage in 2006 and they didn't force me to take anything. They told me I must have buildings insurance but told me there was no requirement to have it through them. They also recommended looking into life / CIC cover but I declined and that was the end of it.

So either the individual that sold to you mis-sold or you misunderstood / wrongly assumed that you were required to take it.

ILW

Cancel it if you don't want it.

Mr_Cus

We looked on the mortgage paperwork last night, buildings insurance is required but life insurance isn't. we do have death in service cover and our families would cover the cost if we became ill, so i think we will be cancelling, thanks for your help

Mr_Cus

weighty1 wrote: »

Finally, if you can't afford the £60/month each now....(you know what coming here!).....then how would you afford the mortgage is you were seriously ill? I can appreciate that everyone has a budget that they have to work within, so why not speak to an IFA who could try and rearrange the cover without necessarily giving up all the benefits?

Like i said we already have critical illness cover with our work and i have death in service, and paying £120 extra per month because we were told we would be 'unlikely' to get a mortgage without it is pretty underhand, that money could have gone towards reducing the mortgage we would be 5-6 thousand pounds less in debt.

Mr_Cus

Lifes_Grand_Plan wrote: »

I too took out a HSBC mortgage in 2006 and they didn't force me to take anything. They told me I must have buildings insurance but told me there was no requirement to have it through them. They also recommended looking into life / CIC cover but I declined and that was the end of it.

So either the individual that sold to you mis-sold or you misunderstood / wrongly assumed that you were required to take it.

She definatly miss sold, yes we were naive and concerned that they would refuse us, so we went with what she told us.
i simply asked what our payments would be she told us then added, dont forget you life insurance to protect the mortgage payment should anything happen to either of you, we assumed by that conversation that it was a requirement,
When she told us it would be around £50 each i was shocked, we hadn't budgeted for that and told her so, she said that they would accept another company insuring us but without it we would be 'unlikely' to get the mortgage cleared without.

dunstonh

Like i said we already have critical illness cover with our work and i have death in service,

Which is fine for covering lost income needs and lost pension. However, its not mean for debt coverage. So, its quite normal for them not to be included in the needs analysis as you know they are not going to be enough.

paying £120 extra per month because we were told we would be 'unlikely' to get a mortgage without it is pretty underhand,

yes it is. But how are you going to prove it? They are going to deny it.

she said that they would accept another company insuring us but without it we would be 'unlikely' to get the mortgage cleared without.

So why didnt you go to another company and get it cheaper?

Also, it may not be underhand. Banks are allowed to insist on life cover on their lending. So, what you were told may be correct and allowable.