Mortgage life insurance query?

lizziegizabit

Unsure if this is in the right place to ask...
Just started to take stock of outgoings as starting to think about remortgaging. We've only just realised we have been paying mortgage life insurance that was sold to us the day we got an AIP back in January 2014 for £101,985. There was a lot of back and forth when we were purchasing our property and we ended up getting 6 mortgage offers between January and June which eventually got reduced right down to £67,895.
Wrongly or naively we always just assumed that this insurance was based on the final mortgage offer that we accepted and only after contacting L&G for clarification of the cover have we found the insured sum was for the original amount. So in my mind we have been overpaying for the last 7 years. I don't know what to do. Is this our fault? Is it the mortgage advisors fault? Should I not have signed up to the insurance until the mortgage had been accepted and finalised? Should I have realised sooner? This was all done in branch with our bank. Looking back over bank statements we paid 5 instalments before we even had the money transferred. We essentially purchased the property from FIL after he passed at a reduced price as stated in his will. What seemed straightforward was a bloody nightmare. I don't know what my next steps are. 
Any advice would be appreciated. 
TIA

Sandtree

Life insurance is just that, whilst notionally you may think that this policy is for the mortgage, this policy is for the kids through uni, this one is for the wife/hubby etc its all ultimately money and just who decides what's done with it may vary.

What other life insurance do you have in place? Have you gone through the various scenarios of what happens if one or more of you die and how finances would work? If the mortgage was paid off could the lowest earner of the two of you continue to have a the same quality of life for the family with just that one income?

Life insurance is so cheap (assuming it is just life and not CI/life combined) that the difference between £100k and £70k is going to have been very small unless you had notable health/lifestyle issues resulting in a big multiplier on the premium

dunstonh

So in my mind we have been overpaying for the last 7 years. I don't know what to do. Is this our fault? 

The majority of the population are under insured.  So, whilst the sum assured may be higher than the mortgage, it is statistically likely that overall, it is still less than what you need.    

However, regardless of that, it is effectively your fault.  You were issued with a quote stating the amount.   At the point it was put in force, the figures would have been issued again with the cancellation rights and finally again with the policy document.  Each asking you to check the information and figures were correct.

 Is it the mortgage advisors fault?

Possibly at fault as well.    Certainly, most people do not put life assurance on risk until exchange of contracts or completion.  By which time, any changes can be made to the policy before it is on risk.    So, there is potential for some "blame" there.

Also, the bank staff often do not see the mortgage through to the end.  So, the person may not have known your borrowing figures had changed.      

This was all done in branch with our bank. 

Which is one of the most expensive ways of doing it.    A whole of market mortgage broker who is also whole of market on insurance would normally be cheaper. 

What seemed straightforward was a bloody nightmare. I don't know what my next steps are. 

I suspect if you complained to the bank, they would uphold the complaint on several grounds.
1 - it was put in force before exchange/completion
2 - it was a higher sum assured than required.

That said, if the premium was at or near minimum premium (typically around £5-£10pm) then it may not have been able to reduce any further and the sum assured would have been increased. 

Life assurance is dirt cheap until you get older.   So, any differences between the two figures is likely to be minimal unless you have bolt on coverage (income protection, critical illness cover etc).