Cancelling your mortgage protection and the cooling-off period explained
In this guide, we explain the process behind cancelling your mortgage protection insurance and the cooling-off period.
This guide is the third guide in our five-part series on finding the best value mortgage protection insurance on bonkers.ie. In this guide, we will explain the cooling-off period, how to cancel your policy, and the reasons why people cancel their mortgage protection cover.
Although having mortgage protection insurance is a legal requirement for mortgage holders, you are legally allowed to cancel your policy with your insurer when you see fit.
By cancelling your policy, it means your mortgage lender will not receive a payout to cover the outstanding balance on your mortgage if you die unexpectedly.
Unless you have paid off your mortgage in full, you will need to replace your cancelled policy with a new one.
To find out all about the cooling-off period and cancelling your policy, read this guide below.
At the bottom of this piece, you will find the links for the other articles in the series.
The right to change your mind
If within 30 days of purchasing your mortgage protection insurance, you decide you no longer want to avail of this policy, you are entitled to cancel it and receive a refund on what you’ve paid so far from your insurance provider.
Known as the cooling-off period, this 30 day grace period begins on the start date of your policy.
Although you are entitled to a refund within the cooling-off period, you may not receive the full amount you have paid, as your insurer may deduct money to cover the administration costs associated with cancelling your cover.
The charges your refund is subjected to will depend on the insurance company you purchased your mortgage protection with.
You can discover information regarding these cancellation fees by reading the terms and conditions of your policy.
How do I cancel my policy?
If you want to cancel your mortgage protection insurance, you can’t just cancel your direct debit payment to your insurer. You must inform your insurer of your intentions.
To do this, you can either ring your insurer and provide them with your policy number or send them a written declaration stating your desire to end your cover.
It’s important to note that having a mortgage protection policy is a mandatory requirement for the majority of mortgage holders in Ireland.
Therefore, if you plan on cancelling it you must have either paid off your mortgage in full or have intentions to attain another policy.
Once your policy has been cancelled you will receive written confirmation from your insurer. They will no longer be liable for any claims you wish to make.
Take a look at this guide to learn about mortgage protection cover.
Cancelling your policy if it was arranged through a lender
If your policy has been arranged by your mortgage lender (e.g. a bank), you may be part of their group scheme, if this is the case your lender will have to cancel your mortgage protection policy for you. Contact your lender and inform them that you want to cancel your policy.
Make sure to check if your policy has been cancelled.
If your policy has not been successfully cancelled by your lender, you can contact the insurance company the lender has set up your cover with directly and enquire what your lender needs to do to ensure your policy has been cancelled.
Then you can inform your lender what process they must follow to terminate the policy. Once the cover has been cancelled then your direct debit account will stop being charged for the cover.
Will I get a refund if I cancel after the cooling-off period?
Although you are free to terminate your mortgage protection insurance whenever you want, you are not legally entitled to a refund on any of the premium you have paid after the 30 day cooling-off period has ended.
I want to switch to another policy, when should I cancel my existing cover?
You should not cancel your existing mortgage protection insurance until your new cover is up and running.
This is because your new policy could be delayed, or your application could be declined, meaning your mortgage lender is left exposed to financial loss if you were to die before your mortgage was paid off.
It is also against the law and it would breach the terms of your mortgage contract to not have a mortgage protection policy set up if you have a mortgage.
If you were to die before your mortgage was paid off, and you had no cover, then your house could be seized and the family would lose any rights to your home.
Why do people cancel their mortgage protection insurance policy?
There are many reasons why you might choose to cancel your existing cover such as:
1. You paid off your mortgage early
You do not owe any money on your mortgage, and therefore the need for this type of cover is no longer required.
2. You are overpaying on your policy
If mortgage protection rates have decreased, or you have quit smoking, you may be overpaying on your premium.
3. You want to switch to a new policy and insurance provider
If the lender you got your mortgage with set up your mortgage protection policy with an insurer, you are more than likely not getting the best price on your premium available.
4. The terms of your mortgage have changed
If you change the terms of your mortgage, albeit by extending its term or topping it up, then your mortgage protection policy must meet the new value of your mortgage, meaning you may need a new one.
Do I have to cancel my mortgage protection if I paid off my mortgage early?
As previously mentioned, you are free to cancel your mortgage protection once your mortgage has been paid off.
However, you do not have to. In fact, you may choose to continue paying into your policy until it expires. This is because if you pass away before your policy ends, then the payout will go to your dependants or estate, as it is not needed to pay off your mortgage.
It's also important to note that if your cover is part of a group policy with your lender, they may cancel the policy once your mortgage is cleared. You will not have an option to keep the policy open.
If I cancel my existing policy now, can I get the same level of cover for the same price?
Unlike other forms of life insurance, mortgage protection cover decreases over time in line with the balance outstanding on your mortgage.
Therefore you will not be able to get the same level of cover you had when you initially took out your mortgage protection insurance.
If you decide to cancel your cover now in the hopes of getting a new, more affordable policy, it may not be possible.
Why is this?
Your new premium may be higher than the last time you took out cover because you are older and/or you have developed health issues, meaning you’re more likely to make a claim.
Can my insurer cancel my policy?
Yes, your insurer is legally allowed to cancel this form of life insurance for a variety of reasons. These include if you:
- Provided false or inaccurate information: During the application process, you must disclose and provide accurate information i.e. regarding your health.
- Failed to disclose all material facts: This is information that may influence the assessment and acceptance of your application, or indicate your likelihood to make a claim.
- Failed to pay your insurance payments: You have 30 days to pay a missed payment, if you are unable to do this, you will not be covered by your policy.
Depending on your mortgage protection insurer, you may be able to reinstate your policy, however, you will have to refer to the terms and conditions of your contract to see if this is possible.
Compare mortgage protection policies on bonkers.ie
What’s more, if you visit our mortgage centre, you can easily compare the different mortgage rates on the market available to you.
Better yet, our mortgage broker service will be on hand to help you once you submit a mortgage enquiry through them.
So start your savings journey today on our site!
Get acquainted with mortgage protection cover
As mortgage protection insurance is a requirement for anyone looking to take out a mortgage, it's important that you find the best value cover available.
With the help of our Quickstart Guide series, you can do just that. Check out the articles in the series below:
- Our Quickstart Guide on mortgage protection outlines the different guides in the series, and what they cover.
- Discover how to compare and apply for mortgage protection cover in our step-by-step guide.
- Take a look at the most frequently asked questions about mortgage protection insurance.
- When selecting your mortgage protection policy, remember to keep these 6 considerations in mind.