Mortgage & Death

whambam

Hi,

Not a pretty topic, however has anyone dealt with their mortgage being reduced or paid off in the event of a sudden death of the mortgage policyholder who had an endowment policy?

Thanks.

CKhalvashi

If there was death benefit on the endowment, yes.

If there wasn't, then probably not.

CK

magpiecottage

By definition, an endowment policy has life cover. Therefore on death the death benefit is paid out.

Historically, lenders used to take an assignment of rights and the insurer paid directly to them. However that stopped in the 1990s so most will pay direct to the surviving policyholder or to the estate.

The proceeds can then be used to pay off (or reduce) the loan.

There are some things which can delay payment:

• The insurer will want to see the death certificate
• It it was never provided at outset the insurer will want proof of age (the words "age admitted" on the policy document mean this has already been provided)
• If there is no surviving policyholder the insurer may not pay out until probate is granted (this can be avoided by means of a trust arrangement)