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How to Assign a Mortgage Life Insurance Policy

assigning your mortgage protection is easy peasy text on images of squeezed lemons

If you’re on this here blog, I can assume a couple of things:

  1. you’ve either bought or are buying a house and
  2. you’ve either bought or are buying Mortgage Protection or Life Insurance because you have to.

I can also probably assume you’re a responsible adult – or at the very least, you’re very good at pretending, which as we all know: all the best people are.

Now, there is one thing you need to know.

This one thing is either coming to you too late, or just in the nick of time, depending on whether or not you now own a house.

The banks are great for mortgages, but they’re a rip off when it comes to Mortgage Protection.

They’ll try to force you to buy their Mortgage Protection (a type of Life Insurance that will pay off the rest of your mortgage if you die) because:

You’re basically paying them so they can pay themselves if you die or get sick before you’re done paying off your mortgage.

Yes, it sucks.

No, there’s not a massive amount you can do about it except arm yourself with all the information you can.

Which is why I’m going to talk you through Mortgage Protection, buying it, and assigning it to your bank/lender.

How do you assign a mortgage life insurance policy?

  1. Arrange your policy (through a broker preferably – scroll down to find out why)
  2. Complete a Deed  of Assignment (it forms part of your legal pack that the bank sends to your solicitor)
  3. Send the completed Notice of Assignment and your policy schedule to the bank
  4. The bank sends the Notice of Assignment and the policy schedule to the insurer
  5. The nsurer assigns your policy to the bank and sends a confirmation letter to the bank

And that’s it, fairly straightforward, ignore the bank if they try to spook you by saying it causes delays if you don’t buy from them. It doesn’t.

What is mortgage protection/life insurance for a mortgage?

As I said above: it’s a type of insurance that pays off the rest of your mortgage if you die. You have to get it if you’re buying a house. You can buy it from the insurer directly, your bank/lender, or a broker who will usually work with all the insurers.

You also have the option of using existing Life Insurance cover (for example, if you already have a policy) as your cover.

To make that crystal clear, your options are:

Mortgage lender/your bank:

  • Tied to the bank so they can only sell you their overpriced Mortgage Protection policy.
  • Your premium forms part of your mortgage repayments so it’s hard to see how much you’re paying for your policy.
  • It’s potentially a problem because: you should always shop around at all of the insurers to make sure you get a good deal.
  • You know how bankers get slated all the time for being more concerned with lining their own pockets? Yes. That. Think about it.
  • If you have a health issue and they can’t offer you cover, then you’re on your own.

Insurance brokers:

  • Will advise on policies from all the  providers to recommend the best deal for you.
  • You get all the information, so you actually know what you’re dealing with.
  • Heavily discounted premiums compared to the banks
  • If you have a health issue and one insurer can’t offer you cover, your broker can try elsewhere.
  • A sound bunch of lads

Insurers:

  • Can only sell their own policies, so you’re definitely not getting the best deal for you.
  • Probably shouldn’t do. Known for being occasionally nefarious, but you do you, boo.
  • If you have a health issue and they can’t offer you cover, then you’re on your own.

An existing policy:

  • It’s a bit confusing but you can use an existing Life Insurance policy as your Mortgage Protection, presuming it’s equal to the value of your mortgage and runs for the same term – so if your mortgage is for 30 years and €200,000, your Life Insurance policy would need to match or exceed that (e.g. a 31 year, €201,000 policy works ; a 29 year, €199,000 policy doesn’t)
  • You have to assign the policy to your lender, if this is the case. Essentially, it’s you saying, “yes, I want to use my Life Insurance policy to pay off my mortgage.”
  • If there’s any moolah left over afterwards, it’ll go to your dependents.
  • You’re better off having both Mortgage Protection and Life Insurance because it’s two pay-outs, but if you’re strapped for the cash, or have had some health issues since you took it out, assigning an existing policy can be a solid shout.

If you’ve already bought your policy and are wondering about how to actually assign it, I get round to that in a second.

By the way, you can’t use life insurance that you have through work (death in service benefit) for a mortgage.

Is Mortgage Protection/Life Insurance different?

Yes. Mortgage Protection is a type of Life Insurance that only covers your mortgage to your lender. Life Insurance leaves a tax-free lump sum to your dependents. They could use it to pay for literally anything they want.

A $2,500 human-sized replica mask of your cat, for example.

Is it confusing? 100 percent.

Is it confusing on purpose? 100 per cent.

My two cents? Get Life Insurance and Mortgage Protection. It’s two pay-outs. It won’t break the bank monthly, but it could mean an awful lot to your family down the line.

Think of it like this: A Mortgage Protection payout gives your family a mortgage-free home. A Life Insurance payout gives your family a replacement income. They need both, so you need both.

Can you change your Mortgage Protection policy?

Yes. Any time you want. It could totally be worth it for a better price or benefits, so seriously: look into it. A few euro in the difference might not seem like much, but take that €5 a month and multiply it out by 12 and then by the length of your actual mortgage (which could be up to 35 years) and you’d be surprised how much it’ll add up to.

Just look at that fiver go. €5 x 12 x 35 = €2,100.

And that’s before we go anywhere near the difference you could save if you wanted to switch your actual mortgage down the line.

And don’t mind your bank if they say that getting Mortgage Protection or assigning an existing Life Insurance policy will delay your mortgage or that they’ll look more favourably on your application if you do what they want.

Remember: It’s all a

 

They’re trying to scare you into buying their overpriced policy.

Tell them where to go.

Because you already know where you can get the best mortgage protection quotes.

Why do you need to assign a policy to a bank?

To make it legal.

Otherwise, it’s a bit like two young fellas swearing loyalty by spitting into a handshake. You telling your bank about your existing policy is grand and all, but if anything happens, they want the legal papers to say they get any payout.

Otherwise, all they’ve got is a spitty handshake and no cover.

How do you assign a Life Insurance policy to a bank/your lender?

It’s a bit like giving your bank a gift. You take out the policy and pay the premiums. When you die (no ‘ifs’ here, pal), your bank gets any pay-out.

It’s a pretty little bow on your gift to the bankers.

To assign the policy you need to complete a deed of assignment with your solicitor. It’s a legal document that the bank sends to your solicitor. It’s written in legalese, which means it’s completely impenetrable to normal people.

You can try reading it, but honestly, you’ll have as much luck taking another crack at Finnegans Wake. At least then you can sound cultured if you pretend you read Joyce’s gibberish.

You have to sign the deed of assignment.

Listen, it’s a bit like Apple’s terms and conditions; everyone ticks the box and nobody has a clue what they agreed to. Have you just sold your soul to a factory wherever iPhones are manufactured? Possibly.

But you’re still gonna have to do it.

The bit you sign is called the Notice of Assignment. You sign it and send it back to your bank.

The normal, helpful lenders will help you and send the notice of assignment to your insurer.

In continuing the theme of bankers being unsound, Ulster Bank won’t actually do this for you. They make you do it for them.

So if you’re with Ulster Bank, you’ll have to send the notice of assignment to the insurer.

If I arrange your policy, I’ll do all of this for you, so don’t worry, I got this!

What happens when the insurer receives the notice of assignment?

The insurer will assign your policy to the bank, so the bank becomes the owner of your policy and gets any pay-out.

Who notifies your bank that the policy has been assigned?

The insurer will send a confirmation of the assignment letter to the bank stating:

“Thank you for your recent Notice of Assignment in respect of the above-numbered policy.
We have noted your interest and confirm that we hold no prior charge on this policy.”

Once the bank has confirmation of the assignment, they’re happy to issue your mortgage cheque.

Is there a fee payable to assign a policy?

Nope.

And just like that, you’ve assigned your policy.

Your TL;DR of tips, once more:

  • Don’t buy Mortgage Protection from your lender. You likely won’t be getting the best deal and it makes it a little trickier if you want to switch your mortgage down the line.
  • You can use an existing Life Insurance policy as your Mortgage Protection. However, you’re probably better off keeping them separate, as two policies = two pay-outs and an easier life for your family.
  • Mortgage Protection = covers your mortgage. Life Insurance = covers you.
  • If you’re bringing your own policy to the table, you’ll need to legally assign it to your bank by following the steps in this article. It’s basically you, your solicitor, your bank and insurer formally saying that the policy will pay-out your mortgage if you die.
  • Before you buy any policy, make sure you go with a reputable broker so that you know you’re actually getting the best deal.

That’s all, folks!

Over to you…

I hope that clears up how to assign a mortgage life insurance policy to a bank. It’s simple, no matter how difficult your bank may try to make it seem.

But if you have any questions, please complete the short form below and I’ll be right back or even better: call me on

 

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