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Why Have I Been Declined for Mortgage Protection Cover?

declined for life insurance

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

Hi Nick, I’ve been declined for mortgage life insurance through 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 won’t offer you cover, especially if you were fully expecting a yes.

Why were you declined for mortgage life insurance?

Declines are quite rare.

Not hen’s teeth rare, but about as rare as Noel from accounts buying a round.

If the insurer feels your pre-existing condition could substantially increase the risk of a claim, then they will refuse to offer you cover.

I know, it sucks and is so unfair. You’re being punished for something outside your control.

But all is not lost, sometimes, your broker…or more than likely your bank makes a mess of presenting your application in the best light.

In all likelihood, they just applied to the insurer who offered the cheapest quote without even considering how that insurer would view your health issue.

What to do if you’ve been refused life insurance or mortgage protection?

1. Find out the reason for the rejection

Straight up, ask the life insurance company why.

But be warned, unless it’s something obvious like a BMI over 50, 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.

2. Meet with your GP

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

You see, GPs aren’t infallible, they can make mistakes when completing reports. Crossed wires are common especially if your GP has retired and another GP completed the report.

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

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

If they feel the decision is harsh, you should appeal.

Ask your GP and/or consultant to write a letter of support outlining why they feel the insurer made the wrong decision.

We’ve 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.

3. Contact a specialist broker

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

They can run your application past their panel of underwriters.

A  specialist high-risk life insurance broker can quickly assess your health history and find a better insurer for you.

But please understand sometimes you can’t avoid a decline, e.g recent cancer diagnosis.

If no insurer will cover you, move quickly…

What happens if I can’t get mortgage protection?

If you can’t get life insurance and you need it to get a mortgage, request demand a waiver of mortgage protection from your bank.

What’s a mortgage protection insurance waiver?

A mortgage protection waiver allows you to take out a mortgage without the requirement to put life insurance in place. A waiver is granted by the bank where 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, you need mortgage protection.

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


(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,

a) 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

b) 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,

c) if 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).

d) you already have sufficient life cover

S126(2)(b) of the Consumer Credit Act 1995  is your saviour.

You should demand a waiver from your bank in accordance with S126.2.b of the Consumer Credit Act 1995

If the bank refuses this waiver, ask them to detail in writing their reasons for the refusal and why they are contravening statute law.

In my experience, the banks will bow down…eventually like they did in Bríd’s case.

But it shouldn’t be this tough. If the Consumer Credit Act states you don’t need mortgage protection, how can the bank insist on it?

They’re getting the deeds to your home as security FFS, what else do they need?

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 cover through work and 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 don’t accept death in service as a replacement for mortgage protection.

What are the drawbacks of a mortgage protection waiver?

For single people without financial dependents, there are none.

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

If they can’t they will lose their home.

Is it worth taking this risk right now or should you reconsider and rent for a while longer especially if you have been postponed and can get cover in the future?

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

Why were you postponed for life insurance?

Postpones aren’t as final as declines. They really mean the insurer wants to take a wait and see approach to your application. Insurers postpone for one of the following three reasons.

1. You’re recovering from an illness or have recently been diagnosed with a new illness.

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 4 years.

2. You have medical tests/scans/investigations arranged for a future date.

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

Say, for example, you have surgery next month.

There is a risk involved with all 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.

3. Recent results were well outside the normal range

The life insurance company will postpone making a decision if your results falls well outside their healthy range to give you time to get in under control. Think high BMI causing weight issues or high HbA1C readings for diabetics.

But a different insurer may come to a different conclusion and offer you cover.

4. COVID19 – the bastard.

That’s whole other topic

How COVID19 is affecting mortgage protection insurance?

Over to you…

Don’t panic if your bank 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 smoke out the best insurer for you.

So even before you make a formal application, 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 we feel gives you the best chance of getting cover with the least amount of 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 beforehand please call me.

Nick | 05793 20836 | nick @ lion dot ie

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