Help! Has my elderly mother been mis sold mortgage insurance?

djfinch

I'm not sure if this is the right forum for this, but I'd be hugely grateful for any feedback from anybody about the following.

In 1998 my mother took out a mortgage with Nationwide and at the same time also purchased a policy of mortgage protection insurance which would ensure she was covered in the event that she died before the mortgage was paid off. In 2004, she paid off the mortgage fully. She asked at the time about the mortgage insurance, assuming this would cease, however she was told by an adviser at Nationwide that she could 'use this as life insurance'.

Subsequently, Legal & General took over all policies from Nationwide in this area. In 2012, my mother received a letter from L&G informing her she was paying a 'mortgage reducing policy'. On further investigation she was told that this would only pay out if she had a mortgage - which she had not had since 2004!

She contacted Citizen's Advice who wrote to Nationwide on her behalf to clarify further. Nationwide wrote back confirming Legal & General were now responsible for this policy. However it was a Nationwide employee who had had advised my mother that the payment she had been making on mortgage insurance 'could be used as life insurance'.

Legal & General then wrote to her in December of 2012 confirming she had an insurance policy but that it would only be valid while her mortgage lasted. On a phone call with L&G, my mother was advised to take out life insurance with them (which she has assumed she had been paying into since 2004). She asked if she could transfer the funds from her previous 'mortgage insurance' into this new policy but was told this was not possible. So she asked if she could receive this money back as a lump sum but was told this was not possible either. She was also told she would not be able to get insurance with anybody else if she cancelled the policy due to her age. This has left her confused and deeply upset.

If anybody can help with clarification here I'd be hugely thankful. It seems that my mother was ill advised in 2004 when she paid off her mortgage. Surely the mortgage protection insurance should have ended at this point? What did the advisor mean about 'being able to use it as life insurance'? If she has been paying this for the last 8/9 years would she not be due a refund?

Any help or advice much appreciated!

weighty1_2

Life insurance is not normally dependent on whether the policyholder has a mortgage or not. Yes, it could be used to pay off a mortgage if there is one but would still normally pay out if there isn't. So on that basis the Nationwide employee is correct in that the cover could have been used as "normal" life insurance. Whether it was appropriate to do so is another matter altogether.

Did your mother make overpayments on her mortgage and that is why the mortgage was paid off before the plan ended?

Is the policy on a level (fixed payout) basis or does the amount decrease over time?

In regards to "transferring funds" from one plan to another it is almost guaranteed that the plan would have been a pure protection product and not contain any sort of investment element so on this basis there are no funds to transfer.

kingstreet

Do you have a copy of the policy?

What was actually covered?

In my experience, the payment protection (off work sick - mortgage payment made) element has to have a mortgage attached to it, but if it is a life cover-only plan, the life cover is paid regardless of if there's a mortgage in existence (or not).

We really need to know what the policy is and what it covers before any conclusion can be reached.

dunstonh

As above, it doesnt matter if there is a mortgage or not. Life assurance would pay out the figure. The only mortgage insurance that matters if you have a mortgage or not is mortgage payment protection (MPPI). Most MPPI plans cease at age 60 to 65.

If the mortgage was paid off earlier, the insurance company wouldnt know that unless she told them.

If she has been paying this for the last 8/9 years would she not be due a refund?

No. Many people keep their life assurance on. Especially when older as they find it hard to replace it. It would have paid out if she died. (assuming it is life assurance)

djfinch

weighty1 wrote: »

Life insurance is not normally dependent on whether the policyholder has a mortgage or not. Yes, it could be used to pay off a mortgage if there is one but would still normally pay out if there isn't. So on that basis the Nationwide employee is correct in that the cover could have been used as "normal" life insurance. Whether it was appropriate to do so is another matter altogether.

Did your mother make overpayments on her mortgage and that is why the mortgage was paid off before the plan ended?

Is the policy on a level (fixed payout) basis or does the amount decrease over time?

In regards to "transferring funds" from one plan to another it is almost guaranteed that the plan would have been a pure protection product and not contain any sort of investment element so on this basis there are no funds to transfer.

Many thanks for your initial feedback weighty1. My mother was able to pay the mortgage off in full in 2004 after recieiving an unexpected inheritance. When she paid the mortgage off she asked an advisor if the mortgage insurance would come to an end and it was at this point she was advised that she could use it as life insurance. So she made the assumption that from that point on she was paying for life insurance, which she has now been told would only be applicable if the still had a mortgage.... I'll investigate the ins and outs of the policy in more depth as soon as I can. Many thanks for your help

2sides2everystory

dunstonh wrote: »

Life assurance would pay out the figure.

What figure? And until what date? And is it the same figure throughout?? Is this not likely to have been what used to be called a "decreasing term assurance" which would have been designed to have a zero sum insured by the date of the expiry of the original mortgage term? Is the degree of upset of the OP's mother proportionate to the current sum insured? How is she to know? She isn't an insurance expert just a punter being constantly milked without anyone bothering to have kept her up to date with why.

The only mortgage insurance that matters if you have a mortgage or not is mortgage payment protection (MPPI).

I think you mean the only mortgage insurance that requires the actual existence of current mortgage payments to protect is MPPI.

If the mortgage was paid off earlier, the insurance company wouldnt know that unless she told them.

What dunstonh has not said is that the left hand at Nationwide clearly did not know what the right was doing when the mortgage was paid off (or have a care).

No. Many people keep their life assurance on. Especially when older as they find it hard to replace it. It would have paid out if she died. (assuming it is life assurance)

I think you might have more usefully said many people receive poor and incomplete advice after the initial product is sold especially when associated products are cancelled or paid off early. No-one at Nationwide would have been incentivised to offer the OP's mother good advice when she paid off the mortgage. By 2004 it would have been seen as a chore for no reward by Nationwide staff who would by then be being constantly chased for sales sales sales like every other high street bank.

The throwaway advice at the time the mortgage was paid off about the reducing mortgage insurance being useful as life insurance was incomplete and clearly not followed up. It is not a question of whether it may have been a technically correct statement to some undisclosed degree. It is a question of incomplete and no doubt undocumented advice.

How long would the insurance actually have been useful if at all in the grand scheme of things that should have been discussed at the time ? It probably couldn't have been discussed in 2004 as I doubt Nationwide employed any competent advisors qualified to discuss life assurance outside mortgages. Clearly they soon afterwards abdicated the existing business to L&G who are also totally uncaring so long as the monthly premiums keep being paid.

This sorry history of a typical Nationwide / L&G case is totally unacceptable. Sadly those immersed in the industry for their living will argue black is white just to keep the whole sorry show afloat for a bit longer.

djfinch

2sides2everystory wrote: »

What figure? And until what date? And is it the same figure throughout?? Is this not likely to have been what used to be called a "decreasing term assurance" which would have been designed to have a zero sum insured by the date of the expiry of the original mortgage term? Is the degree of upset of the OP's mother proportionate to the current sum insured? How is she to know? She isn't an insurance expert just a punter being constantly milked without anyone bothering to have kept her up to date with why.

The throwaway advice at the time the mortgage was paid off about the reducing mortgage insurance being useful as life insurance was incomplete and clearly not followed up.

Many thanks for the feedback, particularly from this post. I'm not clued up about insurance either, but I'm beginning to get a picture of what may have happened. I'm guessing my mother opted for drecreasing term assurance, which I understand as decreasing in payout value as the size of mortgage repayment outstanding falls with time. This being so, once the mortgage was paid off in full in 2004, this policy would, I'm assuming, be worthless (as there would be nothing left to cover)?

If this is the case, it would seem that my mother continued to pay monthly fees towards something that was useless between 2004 and present (e.g. in the event of her death there wouldn't be anything to pay out?). The advisor at L&G told her she does not have life insurnace and that she would need to take out a new one with them (confirming that what she has been paying for is effectively useless). If this was so, wouldn't she have a claim with the financial ombudsman to try and recoup payments made during that time?

Thanks to everybody who has contributed to this thread. It's incredibly useful to gain soem clarity on this matter from folks in the know

stephenni1971

OP, you are not gaining clarity at all as unfortunately there are people posting on here who don't have a clue what they are talking about - as quoted in your last post.

Decreasing cover would still pay out the sum assured with no mortgage in place.

Normal term assurance has no fund value or cash in value.

It could be argued that your mother may have still had a need for the cover after her mortgage was paid if she had dependents ( you for example ).

Several things that you say just don't seem to make sense so it would really help if you were able to provide details of this policy rather than everyone speculate.

Policy Name
Sum assured
Term
Level/Increasing/Decreasing
Start Date

All would be helpful...

kingstreet

If you phone a lender and say "I'm paying off my mortgage what should I do with my mortgage protection plan" I guess you would get several different answers, based on who you spoke to...

One would say it should be cancelled as mortgage payment protection has to be linked to a mortgage.

Another would say mortgage life cover continues and would still pay out even after the mortgage has been repaid.

If she provided the policy name and policy number and a check was made I would suggest Nationwide is at fault, but with no evidence and a likely timescale which pre-dates regulation (14/01/2005) I'm not sure there's an awful lot that can now be done.

I'd still like the OP to tell us what the contract actually covers.

dunstonh

Many thanks for the feedback, particularly from this post.

The person you have thanked is on my ignore list for post trolling. However, reading your quoted text, I can see he/she hasnt changed. Look at the other posts and you see a trend of consistent information.

luci

I am not 100% sure of this. However, if it does turn out to be a Mortgage Payment Protection Insurance, she could ask L&G to refund the premiums made since the mortgage was paid off as there was no insurable interest.

If it is Level Term Insurance then she has life cover from the life of the policy, which has an end date.

The reason behind my thinking is that when people inadvertently take out two policies on the same thing, eg house or car, they can normally get a refund on one of them as they have proof that they were insured elsewhere.

In this case the proof would be that she didn't have a mortgage.

Just a thought and I am happy to be corrected.