Life Insurance And Mortgage: What Are My Options?

Being refused mortgage protection insurance can jeopardise your chances of getting a mortgage. In Ireland, mortgage protection insurance is a legal requirement for all mortgage holders under the 1995 Consumer Credit Act. This type of life insurance pays off the outstanding balance on your mortgage if you die before it has been fully repaid. While most people get accepted for mortgage protection insurance, some applicants are declined due to health or lifestyle conditions. If you are refused cover, there are several steps you can take, such as getting a second opinion, clarifying the reasons for refusal, and appealing the decision. Ultimately, if you can't get mortgage protection insurance, you may be able to request a mortgage protection waiver from your lender.

What to do if you are declined mortgage protection insurance

Being refused mortgage protection insurance can seriously jeopardise your chances of getting a mortgage. So, what can you do if you are refused cover?

Get a second opinion

Firstly, you should know that you are not restricted to taking out mortgage protection insurance with your mortgage lender. You can take out a policy with any provider you choose. Your bank will often only deal with one life insurance company, so you are not getting a wider opinion. By using a broker service, you can talk to more insurers and find one that suits your needs. Not all life insurance companies view illnesses in the same way, and some may be prepared to offer cover for certain conditions that others won't.

Clarify the reasons for refusal

Ask probing questions of your insurer about why you have been refused cover. Sometimes a second medical opinion might put your insurer's mind at ease. Find out how long you have been refused cover for. Is it a flat-out refusal, or is the insurer willing to reconsider your application in the future? Sometimes an insurer might refuse you cover due to a chronic illness, but if the refusal is due to high BMI, high blood pressure, high cholesterol, a recent Covid diagnosis, or recent surgery, they might review their decision in six to 12 months, meaning you can reapply then.

Make sure a mistake wasn't made

When you apply for life insurance, your insurer will usually write to your GP asking for a doctor's report. Depending on what your GP says, you may then be asked to undergo a medical examination or specific tests. However, GPs aren’t infallible, and mistakes can be made. Have a chat with your doctor to make sure no mistakes were made and ask them whether they think the refusal was justified. If so, an appeal can be made to the life insurer.

Prove you're uninsurable

The 1995 Consumer Credit Act outlines specific cases where cover isn't required. If you're over 50, are buying a house as an investment, or can prove you're unable to get insurance, then your lender may be able to waive the requirement for mortgage protection. Usually, a refusal from three insurers is considered proof you can't get insured.

Request a mortgage protection waiver

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

Reasons for refusal

The most common reason for being declined mortgage protection cover is the disclosure of a health or lifestyle condition on the application form. While most conditions can be priced and accepted, insurance companies do have to ensure that they don't accept any unquantifiable risks. They don't want to find that the customer they have just underwritten dies prematurely a short time later.

Therefore, there are a small number of conditions that will typically lead to a refusal. These include:

• Any terminal illness diagnosis.
• Any person with multiple risk factors such as obesity combined with smoking and severe heart disease or diabetes.
• Any person who has shown repeated episodes of self-harm.
• Very high levels of alcohol consumption or people who are diagnosed as alcoholics.
• Gross obesity i.e. Body Mass Index or BMI over 45.
• Where the applicant has a condition that is still under review and no diagnosis has yet been confirmed.
• Travel to perceived dangerous locations.
• Extreme sports.

In rarer cases, you may even be declined cover due to your occupation and nothing to do with your health.

If you are refused cover, you can request a reasons for refusal letter from the life insurance company. However, unless it's something obvious like a BMI over 50 or 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 decision.

Appealing the decision

If you've been refused mortgage protection insurance, it can put your chances of getting a mortgage in serious jeopardy. However, there are steps you can take to appeal the decision.

Firstly, request a reasons for refusal letter from the life insurance company. They may not be willing to discuss the reasons for the decline with you, but they must provide you with a written explanation of their decision. Their Chief Medical Officer will also write to your GP explaining the reasons for their decline.

Next, arrange a visit with your GP to review the letter of decline. Mistakes can sometimes be made, and your GP may be able to confirm that a refusal is unjustified. 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, addressing it to the insurer's Chief Medical Officer.

You can also contact a specialist broker who can assess your health history and determine if there is an insurer who may be a better fit for you.

If you can't get mortgage protection but still want to proceed with the mortgage, you can request a mortgage protection waiver from your lender. A mortgage protection waiver allows you to take out a mortgage without fulfilling the requirement to put life insurance in place. Your lender may grant this if you can't get mortgage protection or if your quotes are significantly higher than normal.

Specialist brokers

If you've been refused mortgage protection insurance, it's worth contacting a specialist broker. They can run your application past a panel of underwriters at other providers and assess your health history to see if there is an insurer who is a better fit for you.

There are around 1,600 registered life insurance brokers in the UK, including mortgage brokers and independent financial advisers that offer life insurance. A broker must be able to access a number of rates and premiums from a panel of carefully selected partners. Some brokers have a limited panel of insurance providers, while others have access to the whole market.

High-risk life insurance brokers are another type of specialist broker. They deal with anyone who has a non-standard disclosure on their application, including those with pre-existing medical conditions, a family history of medical problems, a high BMI, dangerous hobbies or activities, or hazardous occupations.

The main purpose of a life insurance broker is to save you time and effort in looking for life cover. They don't usually charge a fee; instead, they receive a commission from the insurance provider.

Mortgage protection waivers

If you can't get mortgage protection but still want to proceed with your mortgage application, you can request a mortgage protection waiver from your lender. A mortgage protection waiver allows you to take out a mortgage without fulfilling the requirement to put life insurance in place.

Your lender may grant a waiver if you can't get mortgage protection or if your mortgage protection quotes are significantly higher than normal. This is because the Consumer Credit Act 1995 protects you, the consumer, in your dealings with a financial institution.

According to the Act, a mortgage lender must arrange a life assurance policy that, in the event of the borrower's death before a housing loan is repaid, will pay a sum equal to the outstanding principal amount. However, this does not apply if:

• The house is not intended for use as the principal residence of the borrower or their dependants.
• The borrower belongs to a class of persons unacceptable to an insurer or only acceptable at a significantly higher premium.
• The borrower is over 50 years old at the time the loan is approved.
• The borrower has already arranged life assurance, providing for payment of a sum equal to or greater than the outstanding principal amount in the event of their death.

It is important to note that some lenders may still insist on mortgage protection insurance as a condition of granting a mortgage, even if there is no legal requirement for it.

If you are unable to obtain mortgage protection insurance due to health reasons, there are a few steps you can take:

• Get a second or third opinion from different insurers, as not all life insurance companies view illnesses in the same way.
• Clarify the reasons for refusal and find out how long you have been refused cover for.
• Prove that you are uninsurable by obtaining refusals from multiple insurers.
• Make sure a mistake wasn't made by reviewing the information sent to the insurer by your GP.

Frequently asked questions