Mortgage Protection Life insurance is presented as part of the mortgage signing process with an implication that it forms part of the package. If you don’t apply for it, you must sign a statement declining the coverage and take on the responsibility of getting the coverage independently. That’s way too much pressure, you’re not given the information you really require and you’re dealing with a bank representative who is not licensed to properly understand your insurance needs and design an appropriate plan.
There is a convenience factor in applying for this coverage along with your mortgage, but consider the following points before you decide. If you have already bought mortgage life insurance from the bank, you should still read this. It’s never too late to make a correction that could have a profound impact on your family’s future.
We like to address the problem by listing the key questions you should be asking and frankly disclosing the answers you might hear. You’re not going to like this!
7 Questions With Answers You Probably Want to Know.
Mortgage life insurance offered by your bank is nothing special. It is simply a form of life insurance packaged to serve what the bank feels your needs are. It is sold by a lending officer who is not licensed nor qualified to advise you on life insurance. The only advice you’ll receive is contained in the brochure your are given when signing up. It’s better than no coverage at all, but wouldn’t you benefit more from a policy designed specifically for you, especially if it comes at a lower cost?
The coverage decreases in value as the mortgage principal is paid down, even though we find that financial responsibilities often increase over time. The surviving family does not have the option to use the insurance proceeds for other priorities. This total lack of control over the coverage could leave your dependents in a precarious situation if disaster strikes.
When you change mortgage lenders you cannot take your coverage with you. If your health deteriorates and you can’t get coverage on your own, you might end up needing to stay with a mortgage you hate in order to retain your coverage. Since most people change lenders several times in their home ownership journey, it makes a lot of sense to have coverage that you can control and take with you.
Disability benefits are usually limited to 1 or 2 years. Critical illness benefits are usually limited to life-threatening cancer, acute heart attack or stroke and ignore the 21 other conditions that could be covered under your own individual Critical Illness Insurance Contract.
Wouldn’t it be better to have disability insurance in place that covers you for longer periods? Consider the comfort you feel, knowing that you could be covered for illness including cancer, heart attack, stroke, aortic surgery, aplastic anemia, bacterial meningitis, benign brain tumour, blindness, coma, coronary artery bypass surgery, deafness, dementia including Alzheimer’s disease, kidney failure, loss of limbs, loss of speech, major organ failure, major organ transplant, motor neuron disease, multiple sclerosis, occupational HIV infection, paralysis, Parkinson’s disease & sever burns.
Life insurance issued through a bank is usually underwritten quite loosely and claims have been denied because of their short underwriting process. Proper underwriting requires very thorough disclosure and that is difficult to do with a one page application that contains simplified health and lifestyle questions. What is required is a properly licensed insurance advisor who can walk you through a more thorough application process in order to solidify the coverage guarantees that secure the future of those you love.
The coverage is purely tied to your mortgage and when the balance is paid off, the coverage disappears. This can be a serious problem if there are other ongoing needs for life insurance. There also are no options to convert this coverage to a more permanent type of coverage should your needs change once your mortgage is paid off.
Rates of smokers and non-smokers are often lumped together. This often gives smokers a break on their premiums but gives non-smokers the short end of the stick. Smoking reduces life expectancy by at least seven to eight years. Why should you pay for that risk in your insurance rates?
It’s Time to Take Control
Wouldn’t it be better if you took control of this? Educating yourself is a natural first step. We have written a special report on the 7 Things the Banks Don’t Tell You About Mortgage Life Insurance which you can download for free by clicking the following link:
If you’re Confused About Mortgage Life Insurance, You’re Not Alone
It’s probably important to you that your family remains in your home mortgage free if you die and that they have all the financial resources they need to fulfill the dreams you established together.
If that is true, then it is vitally important to us that we help you wrap proper guarantees around those dreams. We’re very passionate about this because, although we’ve walked with our clients in their successes, we’ve also seen others lives ruined through decisions made without proper plans.
None of our schooling prepared us for making important decisions about home ownership, mortgages, life insurance & other financial planning matters. If you find a lot of this overwhelming, it’s so easy to have the wool pulled over your eyes.
The CBC Marketplace Exposé
CBC Marketplace did an excellent exposé on the dangers of bank-issued mortgage insurance that everyone considering or holding such coverage should view. Be prepared for a 19 minute video. The most moving story begins at the 55 second mark. We were shocked at 4:30 mark to see how insurance companies are collecting premiums from a lot of customers who own bank-issued coverage and they will never be able to claim if they die! Although you may find this video disturbing, have heart that there is a better solution. Read on…
If you are not able to watch the video, here is a summary of the two cases where bank-issued mortgage protection life insurance and critical illness coverage did not pay out.
Leanne and Louis purchased their dream home in Burlington, Ontario with the help of a $229,000 mortgage from a major bank. The home had everything they needed and was in an ideal community in which to raise their two daughters. When the bank representative asked them if they wanted mortgage protection life insurance, they thought it was a good idea and signed up for it. They wanted to assure the family could continue to live there should either of them die and the $35 per month premium was not a big deal.
14 months after buying their house and the mortgage life insurance, Louis died of a sudden heart attack, even though he was in great health. Leanne was devastated but had some comfort in thinking that her claim proceeds would pay off the mortgage balance. Imagine the shock Leanne received when she received a letter from the insurance company denying the claim. Because a licensed broker did not help them diligently go through the application, they neglected to recall the heart medication that Louis was on and the insurance company was able to exit the obligation.
Charmaine and Ron in Chatham, Ontario also thought mortgage protection life insurance and critical illness protection was a good idea and the $19 per month premium was affordable. 13 months after buying the home, Ron was diagnosed with cancer. His claim for a critical illness benefit was denied because he failed to disclose that his doctor’s file showed high blood pressure and cholesterol on his chart, even though he was unaware of that diagnosis. Those conditions also had nothing to do with cancer. The contractual wording nullified the entire coverage if any material fact was mis-stated – whether intentional or not! Ron’s income stopped, they’ve borrowed money from friends and family and maxed out their credit cards trying to hold onto the house.
In both cases, signing up for the coverage was a breeze – almost too easy! In most cases involving mortgage protection life insurance from the banks, medical records are not scrutinized until after a person dies and the beneficiaries are making a claim. That’s when the details of the deceased’s health come out and often give the insurance company a reason to deny the claim. Questions are designed for simplicity with no explanation – simple yes or no answers. That leaves loopholes big enough to drive a truck through.
When signing up for coverage using a properly licensed insurance broker on the other hand, medical details are scrutinized before the policy is issued, allowing the insurance company to properly assess the risk and perhaps assess an extra charge. One way or another, your chances of being truly covered are much higher and you will know up front whether you have coverage or not.
Financial representatives at the banks are under a great deal of pressure to sell the mortgage life insurance and the banks make billions of dollars in commissions selling it.
We’ve Got Your Back!
By working with an independent insurance advisor, you will be able to tailor life, disability and critical insurance coverage exactly to your needs, shop for the best rates, control the contract, save more money and better protect your family’s future.
The following summary is a short comparison that compares the problems of bank-issued mortgage life insurance with an alternative that probably works a lot better for you:
Bank-Issued Mortgage Protection
- The bank is the owner, controller and beneficiary of the policy.
- Your coverage is limited to the amount of the mortgage.
- Your coverage will decrease over the term of your mortgage.
- Your options are limited to the bank’s
- You lose your coverage if you switch mortgage lenders.
- Once your mortgage is paid off, you lose your coverage.
- Disability benefits are limited. Only basic heart attack, stroke and cancer coverage.
- Insurance advice received will be in the form of a brochure and the bank representative will not generally be licensed to give advice.
- Protects the bank.
Your Own Custom Insurance Contract
- You own, control and choose the beneficiary of the policy.
- You can get more coverage if you want, at a lower rate.
- Coverage remains the same unless you decide to decrease it.
- We shop the market for the best benefits and rates.
- Your coverage is portable from lender to lender with no need to re-qualify.
- You have the option of continuing all or part of your coverage.
- Much broader disability benefits and 22 covered critical illnesses, including heart attack, stroke and cancer.
- Through a licensed and independent insurance broker, you will benefit from extensive training and education when designing a plan uniquely for you.
- Protects your family