Barclays Life Assurance Linked To Mortgage

swanny65

Hi,

A few weeks ago a friend of our family died, leaving a widow and 3 dependent school age children. He had been a house husband, as his wife was a teacher, and returned to full time work a couple of years ago.

When he died i assumed they had life assurance, as my wife and i have a term assurance policy for our needs, and their mortgage would have been paid off. The widow tells me this is not the case and i am struggling to understand what happened.

It appears their mortgage has always been with Barclays and there was a linked life assurance premium paid with their mortgage, when they first took out a mortgage about 20 years ago. I know the deceased had a pre-existing medical condition which required a major operation at age 10 and long absences from school. However I have never asked exactly what that was, but it was declared to Barclays.

Over the years they borrowed a little extra on their mortgage now and again and sub accounts were added to the account. About 5 years ago they decided to extend their home and borrowed a considerable additional sum of about £40K. Another sub account was created and I understand at this point Barclays withdrew the life assurance on the entire mortgage. The deceased would have been 40 at that time and the widow tells me Barclays said they would not insure them any more.

After Xmas i want to tackle Barclays on whether what they did 5 years ago was correct but before i do that i was hoping for a heads up from anyone on here with experience of Barclays mortgage and the way life assurance is linked to their mortgages.

My life assurance is a stand alone policy and I have remortgaged 5 or 6 times in the past 20 years, so my friends experience is somewhat alien to me.

On the face of it Barclays had the right to refuse to insure them when they asked for the additional £40K, as 15 years after taking out the original mortgage the deceased was a higher risk, i accept that, but the assurance on the original mortgage and smaller advances if accepted previously should not have been withdrawn / cancelled.

Thanks for any help you can offer.

dunstonh

I understand at this point Barclays withdrew the life assurance on the entire mortgage. The deceased would have been 40 at that time and the widow tells me Barclays said they would not insure them any more.

Life assurance issued by Barclays would either be a level term assurance or a decreasing term assurance. Neither would have any direct link to their mortgage. The insurer wouldnt even know about the mortgage being changed unless told.

The figure would not be changed on new borrowing. The old policy would continue to the original term and original sum assured (decreasing at a fixed rate if a decreasing term assurance). Life assurance can rarely be changed easily. Any increase would require a medical questionnaire and acceptance by the insurer. They can reject if health does not meet their underwriting criteria.

However, this would have absolutely no impact on the original policy unless new information came to light that was not disclosed at the time of the original application. Any health issues after the original start date are irrelevant.

On the face of it Barclays had the right to refuse to insure them when they asked for the additional £40K, as 15 years after taking out the original mortgage the deceased was a higher risk, i accept that, but the assurance on the original mortgage and smaller advances if accepted previously should not have been withdrawn / cancelled.

As the mortgage is not linked to the life assurance, was there new life assurance taken out with each increase of borrowing?

swanny65

Hi Dunstonh

Thanks for your reply. That is more or less what i thought should happen. I suppose what i am first checking is that the Barclays Life Assurance is broadly the same as mine, which you imply it is. I am sure the deceased medical history was correctly declared.

I dont believe additional life assurance was taken out with the smaller additional borrowing and like i said i know it was refused at the point they applied for considerably more borrowing - the £40K advance.

I will establish the details of the initial policy and if possible how this policy came to end. You have reassured me that it is unlikely there wasnt anything unusual about Barclays Life Assurance, that i needed to consider.

Many thanks

swanny65

An update before i proceed further...

I have now established the couple had 4 separate mortgage accounts with Barclays that totaled around £50000.00 and were due to be paid off when the widow was 50, in seven years time. These were covered by a decreasing term assurance arranged with Legal and General via Barclays.

Now when the additional sum of £26000.00 was borrowed about 4 years ago (this is correction on my earlier figures) they decided the new loan would be paid off when the widow was 55 and to also extend the existing 4 loans accounts to her age 55.

Barclays told them to contact Legal and General to extend the decreasing term assurance period which they did. Legal and General refused to extend the policy as the deceased had had an operation in his teens for coarctation of the aorta, which is one of the causes of a brain aneursym, which in turn was the deceased cause of death.

I understand they / Barclays tried to find appropriate cover but no one would insure the deceased.

Barclays told the widow she would have to take out her own decreasing term assurance, she was the main earner on approx £45K pa. It appears they decided she could afford the mortgages on her salary but the deceased on approx £18K could not afford the mortgages if she were to die.

Here appears to be the possible mis-advice. Barclays told them to cancel the joint term assurance and take out a single policy in the widows name until she was 55. It appears Barclays were only concerned the loan would be paid if the widow died. Would the correct advice have been to keep the joint policy and the widow take out a separate term assurance to cover the shortfall only on the joint policy in the event of her death?

The other concern i have is the policy was with Legal and General and Barclays didn't sell them their own life assurance policy. Is this "normal" the widow assures me the policy was arranged via Barclays.

Apologies if this is not clear.

dunstonh

I understand they / Barclays tried to find appropriate cover but no one would insure the deceased.

That is highly unlikely. Barclays have only ever been tied agents (either of L&G for a period or Barclays life at a different point). They did not have access to the whole of market.

Here appears to be the possible mis-advice. Barclays told them to cancel the joint term assurance and take out a single policy in the widows name until she was 55. It appears Barclays were only concerned the loan would be paid if the widow died. Would the correct advice have been to keep the joint policy and the widow take out a separate term assurance to cover the shortfall only on the joint policy in the event of her death?

If the joint life policy was a decreasing term assurance, there may not have been a lot of life cover left on the original policy. If that was the case, then you could understand a replacement. However, if there were enough years left and the sum assured was still high enough then keeping it and doing a policy for the difference would have been best.

It appears Barclays were only concerned the loan would be paid if the widow died.

Until the mid to late 90s, Barclays did insist on life assurance for borrowing. If it falls in that period, then that is a possibility. They are allowed to make such as condition and it was quite normal back then but had ceased on new borrowing by the 2000s (except on commercial borrowing).

The other concern i have is the policy was with Legal and General and Barclays didn't sell them their own life assurance policy. Is this "normal" the widow assures me the policy was arranged via Barclays.

Barclays had a period that they were tied agents of L&G.