According to a leading provider of mortgage protection, tens of thousands of mortgage holders could have gotten into trouble because they were unknowingly underinsured.
According to the Royal London Insurance Group, the impact of mortgage arrears and mortgage restructuring agreements agreed by mortgage holders could leave many of them inadequately protected by their mortgage protection policy.
It has warned that if a homeowner dies and life insurance does not adequately cover the outstanding mortgage due to underinsurance, the surviving homeowner could be left with an unexpected and potentially significant financial deficit.
As a result of the financial crisis, around one in eight mortgage holders in Ireland defaulted on their payments, with a peak in 2013.
Royal London has now warned that it is likely some of these people are underinsured, whether they are still in arrears today or whether they had a restructuring arrangement with their lender at the time.
Data from the Central Bank of Ireland shows that the number of main residential mortgage accounts classified as being restructured at the end of December 2021 was 47,062.
According to Barry McCutcheon, Proposition Lead at Royal London, a significant proportion of them may not have reflected these changes in their mortgage protection coverage.
“If that’s the case, that means they’re not covered for thousands of euros they owe their lender. Mortgage protection policies generally cannot be restructured and in most cases a new policy would have to be introduced to reflect the fact that the mortgage is not being reduced or to conform to the amended mortgage agreement.
“This could be a huge source of shock and concern for a property owner following the death of their co-owner (spouse or partner). It could mean he runs into a deficit at a time when he can least afford it,” he said.
https://www.independent.ie/business/personal-finance/thousands-of-homeowners-in-arrears-warned-of-under-insurance-exposure-41557941.html Thousands of defaulting homeowners warned of underinsurance