Why Life Cover Is Required

• It repays the mortgage in full if you die, preventing your dependents from inheriting the debt.
• It protects the lender’s interest by ensuring the loan is repaid.
• It provides peace of mind that your home is secure for your family.
• It is a legal requirement under most mortgage agreements.

Higher Premiums for Life Cover

You may face higher premiums where insurers assess you as higher risk. This can result from factors such as:

• Pre-existing mdical conditions or poor health history.
• Age – older borrowers face increased risk.
• Lifestyle factors such as smoking.
• Requirement for high cover amounts or long-term policies.

While premiums may be high, the law still requires cover to proceed with a mortgage unless a waiver applies.

When Life Cover May Be Refused

Life cover may be declined where:

• Serious or chronic health conditions are present.
• The applicant works in a high-risk occupation.
• There is non-disclosure or inaccurate health information during the application.

In these circumstances, lenders may require written proof of refusal from at least three insurers.

What Happens If You Cannot Obtain Life Cover

If you are unable to obtain life cover, lenders may still proceed with the loan under specific circumstances. You must provide written evidence from at least three insurers confirming refusal on medical grounds. In this scenario, under Section 126(2)(b) of the Consumer Credit Act 1995, the lender must grant a waiver allowing the mortgage to proceed without life cover.

Waiver of Life Cover by the Lender

The law allows lenders to waive the requirement for mortgage protection where:

• The borrower is over 50 years old.
• The borrower cannot obtain cover at a reasonable cost or has been refused by insurers.
• The borrower already holds equivalent life cover.

Under Section 126(2) of the Consumer Credit Act 1995, if you meet these conditions, the lender is legally obligated to consider a waiver. If refused, you can request written justification as to why statutory law is being contravened.

Risks and Considerations of a Waiver

While a waiver allows you to proceed without life cover, it carries risks. If one borrower dies, the surviving borrower becomes solely responsible for the mortgage. Without life cover, there is no safety net, and the property may be at risk if repayments cannot be maintained.

Other Key Considerations

• Lenders do not accept employer death-in-service benefits as equivalent cover, as employment is not guaranteed to continue.
• Carefully review policy terms to ensure coverage is sufficient for the entire loan balance.
• Always disclose accurate health information to avoid later disputes with insurers.