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High life insurance cost & mis sold?

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High life insurance cost & mis sold?

edited 30 November -1 at 1:00AM in Insurance & Life Assurance
7 replies 822 views
james.parsonsjames.parsons Forumite
14 posts
edited 30 November -1 at 1:00AM in Insurance & Life Assurance
Hi,

I've just been reviewing some of my mum's finances and discovered that when she remortgaged the house in 2005 for £30000, she was told she also needed life insurance to go with it.

She was sold an 18 year decreasing term life insurance policy with critical illness cover, beginning at £30000. She was 45 when she bought it and with no health issues. The cost was £34.30 per month.

This to me seems extremely high for the level of cover and I'm concerned she was missold the policy. Firstly, she was told she needed it which wasn't true. Secondly, me and my sister were practically adults by this point and no longer dependents, and thirdly there is no information on how the advisor she used was paid. The total cost will be £7408, which surely would have been better spent on reducing the mortgage term? In the last 3 years of the policy the payment is substantially less than the total premiums paid.

Did anyone else take a similar policy at the same time? How much did you pay? Is there any precedent for making a complaint about mortgage life insurance policies being mis-sold and under what conditions they are considered mis-sold?

Thanks in advance

Replies

  • A cross selling of insurance where the advisor gets commission for advice rather than paying a fee is common and perfectly normal, indeed, many choose this rather than a fee so it may well have been required to get the advice. Did your mum see a broker or IFA type person for the mortgage? What was her plan to pay the house off if she had died or was she expecting her kids to have to sell the home to pay off the debt?
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  • She saw an IFA for the remortgage and paid a flat fee for their service (have it in the mortgage contract).

    For the insurance only have a letter saying thanks for agreeing to take up life insurance and then insurance policy booklet. I think this was sold over the phone.

    I was 18 at the time, and my sister 17. So yes I understand the argument that it's good to have some protection, but within 4 years we would have been independent. The cost of it compared to the benefits does not seem proportional to me. It's the equivalent of taking a policy out now for £42000 and paying almost £50 a month. How much commission was received on these products?
  • jonesMUFCforeverjonesMUFCforever Forumite
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    At the time you were dependant on your mother - at what age did you leave home?
    She could have revised the policy at this time.
    Policy premiums go up and down all the time - I don't think you are comparing like with like.
    What goes around - comes around
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  • Weighty1Weighty1 Forumite
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    Whilst you may have been independent within a few years, how would your mum have maintained the mortgage if she was critically ill?

    Also, using the premiums to pay money off the mortgage would not have done much good if your mum suffered a critical illness within a few months of arranging the mortgage.

    It appears that the adviser has matched a product with the need and there isn't anything which suggests a missale.
  • dunstonhdunstonh Forumite
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    This to me seems extremely high for the level of cover and I'm concerned she was missold the policy.

    This would suggest you have read the statement of demands and needs as that is really the main document that would lead to you to come to that decision. So, what did it say?

    It doesnt seem a high premium. What makes you think it is?

    Secondly, me and my sister were practically adults by this point and no longer dependents, and thirdly there is no information on how the advisor she used was paid.

    a) what matters is point of sale
    b) CIC isnt to do with financial dependents.
    and thirdly there is no information on how the advisor she used was paid.

    So, what happened to the quote issued at point of sale that said the payment?
    Then what happened to the quote sent with the cancellation rights that also said the payment?
    The total cost will be £7408, which surely would have been better spent on reducing the mortgage term?

    And what if she had suffered a claimable event?
    Is there any precedent for making a complaint about mortgage life insurance policies being mis-sold and under what conditions they are considered mis-sold?

    Nothing you have said suggests any missale. Indeed, what you have said suggests she had a financial need for it. And matching the policy to the mortgage is exactly what you would expect from a regulatory and compliance point of view.
    I am an Independent Financial Adviser (IFA). The comments I make are just my opinion and are for discussion purposes only. They are not financial advice and you should not treat them as such. If you feel an area discussed may be relevant to you, then please seek advice from an Independent Financial Adviser local to you.
  • Thanks for replies. Perhaps some nativity on our part here and lack of understanding / knowledge. Will go back and reassess

    Cheers
  • ACGACG Forumite
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    I've just been reviewing some of my mum's finances and discovered that when she remortgaged the house in 2005 for £30000, she was told she also needed life insurance to go with it. - It may have been a requirement of the Mortgage to take out life insurance? Your mum may have liked the idea of Critical Illness as a bolt on? If you were not part of the conversation, how do you know what was discussed?

    She was sold an 18 year decreasing term life insurance policy with critical illness cover, beginning at £30000. She was 45 when she bought it and with no health issues. The cost was £34.30 per month. - Was the Mortgage for £30,000 over 18 years? If so, then the advisor has protected the debt, nothing wrong with what they have done and yes, in the latter years it will pay out less than the overall cost. The alternative would have been a level term policy but that would have cost more.

    This to me seems extremely high for the level of cover and I'm concerned she was missold the policy. The price is not relevant to whether or not it was miss sold. Critical Illness and life insurance is probably cheaper now due to medical advances.

    Firstly, she was told she needed it which wasn't true. - Are you sure it was not a requirement of the Mortgage? If so, then it is a case of he said/she said and so you can make a complaint but no guarantee it would be successful. Secondly, me and my sister were practically adults by this point and no longer dependents - I am not sure what this has to do with anything. The policy was presumably taken out to protect the Mortgage.
    , and thirdly there is no information on how the advisor she used was paid. Prior to around 2009, the policy documents never disclosed that commission was paid.
    The total cost will be £7408, which surely would have been better spent on reducing the mortgage term? You say that, but had your mum been diagnosed with a medical condition would you be saying the same thing or would you be thinking mum does not need to worry about her mortgage as it is paid off?

    In the last 3 years of the policy the payment is substantially less than the total premiums paid. - This surely can not be a surprise. It is a decreasing policy, that means the benefit comes down.

    Did anyone else take a similar policy at the same time? How much did you pay? Is there any precedent for making a complaint about mortgage life insurance policies being mis-sold and under what conditions they are considered mis-sold?

    You have listed your reasons for the miss sale, although surely only your mum can determine if it was miss sold or not.

    If your mum is convinced it has been miss sold, put a letter together and send it to the broker and see what they come back with. Nothing you have said makes me think it has been miss sold other than she was told she has to have it. That could be true (some mortgages did make life insurance a requirement) but even if it is not, it is going to be difficult to prove.
    I am a Mortgage Adviser
    You should note that this site doesn't check my status as a mortgage adviser, so you need to take my word for it. This signature is here as I follow MSE's Mortgage Adviser Code of Conduct. Any posts on here are for information and discussion purposes only and shouldn't be seen as financial advice.
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