Where a person is the legal owner of a life
assurance policy and enters into an IVA agreement, is the Life Assurance Company in any way liable to the Supervisor of the IVA arrangement should the policyholder wish to cash in the policy and take the benefits. If the answer is yes what notification would you require from the Life Assurance Company.
I'm not really sure about this, but I imagine that if the policy were to be cashed in, you would be expected to pay the proceeds across to the IVA.
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The greatness of a man is not in how much wealth he acquires, but in his integrity and his ability to affect those around him positively.
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You are probably right Paul, unless it is tied in with the mortgage.
Sharing from experiences of dealing with debt
The greatness of a man is not in how much wealth he acquires, but in his integrity and his ability to affect those around him positively.
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Most endowment policies are to be used to repay the mortgage whether or not the mortgage company has it formally assigned which most do not. We would never advise anyone to surrender a policy pre IVA as it automatically puts them in breach of their mortgage terms and conditions. In addition, these policies have usually been in force for some time and provide life insurance cover which would be expensive to replace if available at all.
As to the original question, the life assurance policy would have been disclosed and excluded specifically to repay the mortgage and if the debtor surrendered it the money would be taken as a windfall. If the debtor spent it, we would petition for their bankruptcy as it would be deemed a severe breach. The life assurance company would not be liable unless the supervisor notified them of his/her interest in the policy and this was ignored.
Presumably though, if it is not tied in with a mortgage, and it had a surrender value, you would be expected to surrender it once the IVA was set up and pay the proceeds across?
Sharing from experiences of dealing with debt
The greatness of a man is not in how much wealth he acquires, but in his integrity and his ability to affect those around him positively.
Bob Marley. http://kallis3.blogs.iva.co.uk
We never offer them and creditors do not ask for them. Very few endowments are actually assigned or charged to the mortgage companies as this procedure was pretty much abandoned in the nighties. Most endowments could be easily surrendered because as people remortgage the new company does not register their interest in the policy but has the debtor sign to say that they have one and it will be used to repay the mortgage balance when it matures. This removes any liability from the mortgage company for a subsequent shortfall as they had nothing to do with the policy.
However, if the debtor surrenders the policy it is a breach and technically they would fall into arrears as there no longer is a repayment vehicle for the mortgage. They would have to switch to repayment to correct the breach which could increase the monthly payments by more than is saved on the policy. The life insurance element is also cancelled and as I was saying earlier this can prove devastating. A large number of people who enter IVAs have had medical problems which were a contributory factor to their problems. These conditions are covered by the existing policy but may be difficult to insure against now. For example, depression hugely inflates the premiums and many of our clients have been treated at some stage by their doctor.
If creditors demand the surrender of an endowment policy and the debtor agrees, then if something happens later it is not the fault of the IP, but if the IP advised it and a debtor subsequently died without any cover, a smart lawyer make seek to take an action against that IP. I am not sure how other firms operate but I personally would never advise anyone to surrender a life assurance policy or cancel a life only policy.
Michael Peoples wrote:
We never offer them and creditors do not ask for them. Very few endowments are actually assigned or charged to the mortgage companies as this procedure was pretty much abandoned in the nighties. Most endowments could be easily surrendered because as people remortgage the new company does not register their interest in the policy but has the debtor sign to say that they have one and it will be used to repay the mortgage balance when it matures. This removes any liability from the mortgage company for a subsequent shortfall as they had nothing to do with the policy.
However, if the debtor surrenders the policy it is a breach and technically they would fall into arrears as there no longer is a repayment vehicle for the mortgage. They would have to switch to repayment to correct the breach which could increase the monthly payments by more than is saved on the policy. The life insurance element is also cancelled and as I was saying earlier this can prove devastating. A large number of people who enter IVAs have had medical problems which were a contributory factor to their problems. These conditions are covered by the existing policy but may be difficult to insure against now. For example, depression hugely inflates the premiums and many of our clients have been treated at some stage by their doctor.
If creditors demand the surrender of an endowment policy and the debtor agrees, then if something happens later it is not the fault of the IP, but if the IP advised it and a debtor subsequently died without any cover, a smart lawyer make seek to take an action against that IP. I am not sure how other firms operate but I personally would never advise anyone to surrender a life assurance policy or cancel a life only policy.
What does female sleepwear have to do with it??[:D]
Discharged today the 8th feb 2012. View is much brighter now.
Continuing to rebuild our credit worthiness.
We would never advise it without ensuring that replacement life cover was in place, however the policy is an asset which would be captured under bankruptcy proceedings and does have to be disclosed. In my experience, creditors will want to see them surrendered, however fortunately I don't see them so much these days.
It is certainly true that there are few about these days and those that are have been running for some time. If the debtors have had previous health problems or are much older than when the policy was taken out, replacement life cover could be almost as expensive as the original endowment policy.
I agree that they would be captured in bankruptcy as would the property, but if the offer is reasonable and the IP can justify the debtor retaining the policy, creditors seem not to have a problem. It may be down to individual cases but I would rather a creditor requested the surrender as a modification as opposed to us advising the client to offer it prior to the meeting. As long as it is disclosed and we have supplied an up to date surrender value it is up to creditors if they want to demand the policy which avoids any comeback against us in the future.
