Written answers

Wednesday, 15 January 2014

Department of Finance

Mortgage Protection Policies

Photo of Pearse DohertyPearse Doherty (Donegal South West, Sinn Fein)
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150. To ask the Minister for Finance the situation and rights of those who have a life assurance policy which is not in arrears assigned to a mortgage that is in arrears. [1523/14]

Photo of Michael NoonanMichael Noonan (Limerick City, Fine Gael)
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Section 126 of the Consumer Credit Act 1995 requires that, subject to certain exemptions set out in the Act, “a mortgage lender shall arrange a life assurance policy providing, in the event of the death of a borrower before a housing loan made by the mortgage lender has been repaid, for payment of a sum equal to the amount of the principal estimated by the mortgage lender to be outstanding in the year in which the death occurs on the basis that payments have been made by the borrower in accordance with the mortgage”.

By way of general information, the most common type of mortgage protection is a reducing cover life assurance policy. Such policies are designed so that cover reduces in line with the amount of capital outstanding on the mortgage, assuming that mortgage repayments are made as they fall due. Where arrears arise the mortgage amount owing to the credit institution will not decrease while the mortgage protection cover will continue to decrease. In such cases the policy may only pay what would be due under normal circumstances, i.e., repayments being made and therefore the additional amounts due arising from the arrears may not be covered.

Where a borrower has concerns in relation to an action taken by a mortgage lender in respect of a life assurance policy, the borrower should, in the first instance, examine carefully the terms and conditions of the relevant contract. If the borrower’s concerns remain, then a formal complaint should be made to the lender.

Finally, if there is not a satisfactory outcome as a result of this approach, then there is the option of referring the matter to the Financial Services Ombudsman who deals independently with unresolved complaints from consumers about their individual dealings with all financial service providers. The Office can be contacted at and is a free service to the complainant.

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