Bank not obliged to ensure homeowner had insurance

Insurance policies,
Bronwyn complained to the bank on behalf of her son Oscar’s estate after discovering he had no life insurance to clear a home loan. The pair had lived together, but Bronwyn, in her 80s, had no income to service the loan. She said Oscar had assured her he had life insurance that would cover the loan in the event of his death. She complained to the bank that there ought to have been a policy. She said there either was one but the bank had not discovered it, or the bank had acted wrongly by giving him a loan without ensuring he had life insurance. Unable to resolve her complaint with the bank, she asked us to investigate.
October 2021

Our investigation

Banks are under no obligation to ensure customers have life insurance before giving them a home loan. We discovered Oscar had applied for life insurance when he sought the home loan, but the bank declined his application because of his medical history. A copy of the letter the bank sent to Oscar, declining his application, was on file. Even if he had not received that letter, we found the bank could not be responsible for his belief that he had insurance: the application form made clear it was an application only and subject to approval, and he had never paid life insurance premiums or received any correspondence suggesting the existence of a life insurance policy after applying for it. Also, a subsequent diary note about his home loan recorded a discussion between Oscar and the bank about his inability to get life insurance because of his medical history. 


We did not uphold Bronwyn’s complaint.

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