Switching Banks? Here’s What Happens to Your Mortgage Protection

If you’re refinancing or moving your mortgage to a new bank, at some point someone will say:

“What about your mortgage protection?”

And that’s usually where the confusion starts.

You sorted this years ago.

You’ve been paying it quietly every month.

You assumed it was done and dusted.

Now you’re being asked about it again.

So let’s just walk through it calmly.

First Question: Can You Keep What You Already Have?

Sometimes, yes.

If your new mortgage is roughly the same amount and the same length of time as your old one, there’s a good chance your existing policy will still do the job.

The new bank will just check two simple things.

Is the cover amount at least equal to the new mortgage?

And does the policy run for at least as long as the new mortgage?

If the answer to both is yes, you’re usually just looking at assigning the old policy to the new lender.

No new application. No medical questions. No drama.

That’s the easy scenario.

If you’re not switching bank but simply thinking about moving your insurance to a different provider, that’s a separate issue. I’ve covered changing life insurance companies here. 

What If You’re Borrowing More?

This is where it changes.

If you’re increasing the loan, your existing policy might not be enough anymore.

You then have three realistic options.

1. The simplest (if you have it) is to exercise the Guaranteed Insurability Option
2. You can take out a small additional policy just to cover the extra borrowing.
3. Or you can cancel the old policy and apply for a brand new one covering the full new mortgage.

Options 2 and 3 mean underwriting.

That means answering health questions again.

If your health is exactly the same as when you first applied, no issue.

If it’s changed, even slightly, the new cover could be loaded, postponed or declined.

Your existing policy, if you leave it alone, keeps its original terms.

That’s why rushing this part is where people get into trouble.

What If You Extend the Mortgage Term?

This one catches people all the time.

Let’s say your original mortgage had 18 years left on it.

You refinance and stretch it back out to 25.

Your policy still ends in 18 years.

The bank won’t accept a policy that runs out before the mortgage does.

So now you’ve a gap to deal with.

Hopefully you bought Convertible Mortgage Protection.

Otherwise you will need a new policy for the full amount over the extended term of the new mortgage.

Do You Have to Use the New Bank’s Policy?

No.

And this is important.

You don’t have to buy mortgage protection from your new lender.

And if your current policy doesn’t have those two features, make sure any new policy you arrange does.

Banks areconvenient, but you’re completely free to arrange your own cover, as long as it meets their requirements.

When Will You Definitely Be Reapplying?

If you’re removing or adding a borrower or if the structure of the mortgage changes in a meaningful way.

In those situations, you’re almost certainly back into application territory.

The One Rule That Really Matters

Do not cancel your existing mortgage protection until you are completely clear on what the new bank requires and any replacement cover is fully in place.

Not “should be fine”.

Not “the broker said it’ll go through”.

Properly approved and live.

If you cancel first and then run into an underwriting issue, you suddenly have a mortgage timeline ticking in the background while trying to secure new cover.

That’s not a comfortable place to be.

So What Should You Do Now?

Start simple.

Pull out your existing policy documents.

Check the remaining term and the current cover amount.

Check for the GIO and Conversion Option.

Compare that to the new mortgage details.

If it still fits, you’re probably just looking at reassignment.

If it doesn’t, move carefully and don’t cancel anything until you’ve explored your options.

If you’re in the middle of refinancing and not sure whether your current mortgage protection still works, complete the short questionnaire below and I’ll tell you straight whether you’re fine or whether something needs to change.

Review My Mortgage Protection

Thanks for reading

Nick