Recommended life insurance exceeded insurance needs

Insurance policies,
Delia took out loan protection insurance with her bank for $50,000 – the same amount as her loan at the time. When she increased her loan 10 years later to $200,000, the bank referred her to an insurance specialist to review her cover. Delia wanted to increase her insurance to reflect her changed circumstances as she was now a home owner with a dependent child. The bank sold her life insurance which included $200,000 to repay her debts in the event of her death. Her existing loan protection policy continued.
December 2019

Years later, the premiums were becoming unaffordable for Delia and she reduced her insurance. Delia then complained to the bank that she was initially over-insured. She wanted excess premiums refunded but the bank declined.

Our investigation

Due to the passage of time since the insurance had been taken out, it was difficult to determine what had happened when the insurance was sold. But looking at Delia’s stated insurance goals, we concluded she would have needed cover of $200,000 to meet her goal of repaying her debts if she died. With her life insurance and loan protection insurance, she had cover of $250,000 - $50,000 in excess of her needs.

In light of our views, the bank offered to reimburse Delia $4,000 to cover the extra premiums she had paid for the extra $50,000 insurance.


Delia accepted the offer.


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