Why Have I Been Declined for Mortgage Protection Cover?

You may have found this article after asking Mr Google a question…just like Edith did

Hi Nick, I’ve been declined for mortgage protection by my bank, can you help? I’m in a bit of a panic as never expected any issues at all.  Thanks

It’s hard to stomach when your life insurance company declines your application, especially if you were fully expecting a yes.

Why Were You Declined for Mortgage Protection?

If the insurer feels your health could substantially increase the claim risk, they will refuse to offer you cover.

I know, it sucks and is so unfair.

The bank is punishing you for something that may be outside your control.

But all is not lost.

If you were declined through a broker, they most likely applied to the insurer that offered the cheapest initial quote without even considering how that insurer would view your health issue.

If it was the bank, they could only send your application to their tied insurer (Irish Life usually).

So, that still leaves us with options.

I’m not saying coverage is a shoo-in, but we have secured coverage for clients after another insurer had declined.

What if You’ve been Refused Mortgage Protection?

1. Request a reasons for refusal letter

Straight up, ask the life insurance company why they declined to offer you cover.

But unless it’s something obvious like a BMI over 50 or that you’re still having cancer treatment, they won’t discuss the reasons for the decline with you.

Instead, their Chief Medical Officer will write to your GP explaining the reasons for their decline.

This is frustrating, but there is no way around it.

2. Meet with your GP

Arrange a visit with your GP to review the letter of decline.

GPs aren’t infallible; they may have made a mistake when completing your PMAR.

Crossed wires are common, especially if someone other than your regular GP has completed the report.

Double-check all the stuff that the GP sent to the insurer.

If it’s all correct, ask your GP to be honest with you and whether, in their opinion, a refusal is justified.

3. Appeal the decision

If your GP feels the decision is incorrect, you should appeal.

Ask your GP and/or consultant to write a letter explaining why they feel the decision is wrong. Address it to the Chief Medical Officer (you’ll find their details in the letter).

Our clients have successfully appealed some decisions, not many, I’ll be honest, but it’s worth a shot, especially if the insurer declined you without seeking a medical report.

4. Contact a specialist broker

Contact a life insurance broker who specialises in this sort of stuff.

We can run your application past our panel of underwriters at the other providers.

We can quickly assess your health history and tell you if there is an insurer who may be a better fit for your health history.

What Happens if You Can’t Get Mortgage Protection?

If you can’t get mortgage protection but want to proceed anyway, you should request a mortgage protection waiver from your lender.

What’s a Mortgage Protection Waiver?

A mortgage protection waiver allows you to take out a mortgage without fulfilling the requirement to put life insurance in place.

Your lender can grant a waiver if you can’t get mortgage protection or if your mortgage protection quotes are significantly higher than normal.

Let me introduce the Consumer Credit Act 1995.

This act protects you, the consumer, in your dealings with a financial institution, in this case, the big bad bank that won’t give you a mortgage.

Here’s Section 126 of the act. I have paraphrased in blue to make things easier

126.—(1) Subject to the provisions of this section, a mortgage lender shall arrange, through an insurer or an insurance intermediary, 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, such sum to be employed in repayment of the principal.

If you’re getting a mortgage, the lender must ensure you have mortgage protection in place.

(2) Subsection (1) shall apply as respects all housing loans except—

Unless

(a) where the house in respect of which the loan is made is, in the mortgage lender’s opinion, not intended for use as the principal residence of the borrower or of his dependants,

the mortgage is for an investment/rental property

(b) loans to persons who belong to a class of persons which would not be acceptable to an insurer, or which would only be acceptable to an insurer at a premium significantly higher than that payable by borrowers generally

the insurer won’t offer you cover, or will only do so at an extortionate premium

(c) loans to persons who are over 50 years of age at the time the loan is approved,

you’re over 50

(d) loans to persons who, at the time the loan is made, have otherwise arranged life assurance, providing for payment of a sum, in the event of death, of not less than the sum referred to in subsection (1).

you already have sufficient life cover

Can You Use Death in Service Instead of Mortgage Protection?

My husband has life insurance and sickness cover for his salary through his work, could this cover us instead of a mortgage protection policy

It’s a comfort for the bank that he has life insurance through work, which may improve your chances of a waiver.

However, there is no guarantee your husband will be in the same job when there is a claim.

For this reason, the lenders won’t accept death in service as a replacement for mortgage protection.

What are the Drawbacks of a Mortgage Protection Waiver?

If you’re buying as a couple, and the one without mortgage protection dies, the survivor will have to pay the whole mortgage on their own.

If they can’t, they will lose their home.

So you have to weigh up whether it’s worth taking this risk right now.

Or should you reconsider and rent for a while longer, especially if you can get cover in the future?

That’s a nice segue (pronounced segway) into the reasons for a postponement.

Postponed for Mortgage Protection – Why?

Postpones aren’t as final as declines.

They mean that the insurer wants to take a “wait and see” approach and will reconsider your application at a future date.

Insurers postpone for one of the following three reasons.

1. Recent diagnosis / recently finished treatment

But not enough time has passed to convince underwriting that you have fully recovered.

e.g you need to be at least 5 years clear of some forms of cancer before a life insurer will approve your application.

This means the life insurance company will postpone you for another 12 months if you have been cancer-free for four years.

2. Planned tests/scans/investigations 

The life insurance company will postpone until your test results are available.

Say, for example, you have surgery next month.

There is a risk with surgery, even if it’s not life-threatening.

Life insurers are naturally risk-averse, so they may postpone making a decision until after the surgery.

The most common reason we see for postpones is for follow-ups or treatment for abnormal smears.

3. Abnormal recent results

The life insurance company will postpone making a decision if any test result falls well outside the normal range.

This is to give you time to get it under control and to have a re-test.

Postpones are common for cancer, very high cholesterol and diabetes.

Again, a different insurer may offer you cover.

Over to you…

Don’t freak out if your bank has declined or postponed you.

We can check for cover elsewhere.

We’re quite good at it.

We know which insurance company is best for most health conditions, and if we don’t, we’ll discuss your case with all our providers in confidence to determine the best insurer for you.

So, even before you formally apply, you’ll have a good idea of your chances of getting cover and the likely final premium.

We don’t just apply to the cheapest insurer or the one who happens to pay the highest commission.

We’ll recommend the insurer that gives you the best chance of mortgage protection with the least hassle.

Need some help?

Give me a quick outline of your situation using this form, and I’ll be right back.

If you’re in a rush or want a quick chat, please call us at 05793 20836 | nick @ lion dot ie

Thanks for reading

Nick

Editor’s Note | We published this blog in 2020 and have regularly updated it.