Lloyds sent a ‘final response letter’ where the bank appreciated the policy had been set up with too much cover and agreed to refund the excess premiums plus interest.
But the bank refuted her other complaint, rebutting it did not accept the type of life insurance Miss H already had — a death-in-service benefits through her pension scheme — to cover the mortgage, which was the reason she had been required to take out an LTA policy.
The adjudicator and the ombudsman backed Lloyds and said the bank was entitled to require borrowers to have adequate life insurance in place as a condition of lending and that it was a “legitimate commercial decision” at the time.
Mr Davenport agreed with the bank that Miss H's death-in-service benefit could not be used as cover for a mortgage, as the lump sum was unlikely to be sufficient to cover the loan and Miss H could have nominated a family member and Lloyds would not have claim to the funds.
Mr Davenport also acknowledged the bank had already agreed to pay out the difference between the £45,000 and the £43,7000 cover.
Therefore overall, the ombudsman ordered Lloyds to compensate Miss H for the difference between the overall costs of an LTA policy for £45,000 (the policy she did take out) and the policy she ought to have had — a DTA policy for £43,700 — plus interest.
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