If I die who gets money from mortgage insurance?

rhodesRocks

Bought house 5 years ago, live with partner and 3 kids. We were advised to take out an insurance policy for the mortgage (as well as building & contents, and Critical Life) at the Estate Agents by their "independent" financial adviser.

Five years down the line, Legal and General write to inform us that our separate policies should be placed in trust.

We were under the impression that if one of us were to die, the other would get the money from the insurance to pay the mortgage off---apparently not though! :mad::mad:

Apparently because we aren't married (which they knew when we took the policy out) the money from the insurance would go to either of our "estates" if we died.

The financial adviser tasked with getting these policies into trust was on the phone this morning and when I cottoned on that that would mean my alcoholic mother would have a claim to the house/money from the insurance from it if I died, I was mighty shocked!

Have we been mis-sold these policies? The adviser (obviously) says the first adviser has done nothing wrong with how we were sold them because he isn't a specialist in wills---my thinking is if he's a financial adviser, his professional knowledge would mean that he would know that people not married might have problems if one of them were to die with regards to gets the insurance money

can anyone shed any light on it for me?

opinions4u

No, you've not been mis-sold. Your need for life cover to protect a debt has been met.

Get wills made that state exactly what you want to happen to your assets in the case of death.

rhodesRocks

It could have been pointed out surely by a professional to a lay person that a relative could make a claim for the insurance? I've been sat here for 5 years thinking everything was ok, and was mortified when the penny dropped!

The house is "tenants in common" (both have equal rights)

noh

No you haven't been mis sold the policies.
You each need to write a will so that your assets will be distributed according to your wishes rather than the rules of intestacy.
The policies should be placed in trust as you have already started to do.

dunstonh

We were advised to take out an insurance policy for the mortgage (as well as building & contents, and Critical Life) at the Estate Agents by their "independent" financial adviser.

You say "independent" financial adviser, estate agent and legal & general. My gut feeling with that combination is that it was not an independent financial adviser but an L&G tied sales rep. Not many IFAs work in estate agents. Most are tied sales reps and L&G have a large number in estate agents.

Five years down the line, Legal and General write to inform us that our separate policies should be placed in trust.

This also suggests it is an L&G sales rep as L&G would not suggest such a thing if an IFA had done it.

We were under the impression that if one of us were to die, the other would get the money from the insurance to pay the mortgage off---apparently not though!

No, your assumption is correct. That is what would happen.

Have we been mis-sold these policies?

No. Mortgage policies are rarely set up in trust. No need to be. As long as they are joint owner, joint life first death then the other owner gets the proceeds on death.

The adviser (obviously) says the first adviser has done nothing wrong with how we were sold them because he isn't a specialist in wills---my thinking is if he's a financial adviser, his professional knowledge would mean that he would know that people not married might have problems if one of them were to die with regards to gets the insurance money

As the other policy owner gets the money its irrelevant.

If you are using L&G sales reps, then it could be that this whole trust issue is an attempt to generate more sales when its quite possible that nothing needs doing (other than a Will - which a local solicitor can sort and not some unqualified or low qualified sales rep).

Have you checked the FSA register to see if the person is an independent of L&G sales rep? If they are pretending to be IFAs when they are tied agents then you should terminate your dealings with them and use an IFA. You can go to :
http://www.fsa.gov.uk/register/indivSearchForm.do;jsessionid=0951fa0e52e84d48a7bbd93c2f86f69a.s6fNml1Ka38InBbv-ArJrwTPoNCNa30Ocybtah0IaNuIahiIbh0IaNfwmxiInxiObk9ynhvybMSHc30Ka2aToi5hch0Na2TSn7bvq70KawTAqQ4InQXQ-BjF8NaOb38!!!bMnkrDqRfzqwbMnkrDqRfzqwbynknvrkLOlQzNp65In0__

Type in the name of the person and search, it will tell you the firm name they are attached to. If you click on that and select principles in the link, it will tell you if they are an appointed rep of L&G or not (it will say legal and general if they are).

A local IFA is still worth seeing if these are L&G reps as the IFA can almost certainly come in cheaper in cost on the life assurance than L&G (even if the IFA uses L&G again themselves) as tied sales reps products are more expensive than IFA ones.

getmore4less

You need a will

The house is not jointly(you say not in your followup post) owned and die intestate then those rules apply and your share of the house will not go to your partner.

rhodesRocks

From what I can find, they are not joint policies, but 2 separate ones for the mortgage

rhodesRocks

getmore4less wrote: »

You need a will

The house is not jointly(you say not in your followup post) owned and die intestate then those rules apply and your share of the house will not go to your partner.

do you mean the "tenants in common" bit? I might have that wrong, but I do know it's the one where we are both equal owners

getmore4less

rhodesRocks wrote: »

do you mean the "tenants in common" bit? I might have that wrong, but I do know it's the one where we are both equal owners

Thats it, your 1/2 of the house becomes part of your estate.

With joint tenants, survivorship rules apply so the house is not part of the estate but 1/2 the value is for IHT purposes.

Thrugelmir

rhodesRocks wrote: »

Apparently because we aren't married (which they knew when we took the policy out) the money from the insurance would go to either of our "estates" if we died.

As has been said already. You really should have had wills drawn up. To cover your entire circumstances not just clearing the mortgage.

Wh05apk

This is not an issue of wills, all single life policies should be written in trust, otherwise the proceeds are paid to the estate, which potentially will then be subject to IHT.

By placing the policies in trust, any proceeds will be outside of your estate, and so currently not liable to IHT, and will also be paid in accordance with your wishes, quicker than potentially having to wait for probate.

Putting the policies in trust should be simple, a fairly simple form, you will need a couple of trustees, and that is it, there should be no fees connected with this, although as Dunstonh says, whilst L&G are doing the right thing advising you to sort this now, I suspect it is a thinly veiled sales attempt, once you sit down with the "advisor" no doubt they will try to recommend further products, you could just phone L&G and ask them to send you the forms.