We’ve all been there. You’re almost done signing those mortgage documents for a new house, refinance or renewal and your mortgage broker slips you one more populated document. Exhausted from the entire process, it’s easy to skip the fine print and just “sign” by the dotted line. It’s the document that will protect the you (and the lender) should you either die or suffer a disability during the period in which you are repaying your mortgage loan. Your broker earns a healthy additional commission from selling you the insurance product and you feel as though you are protected, right?
In Canada there are three big insurers who provide mortgage insurance to most of the big banks. All of them use a practice known as post-claim underwriting for creditor products. I’m sure you’ve heard of somebody being denied an insurance claim for insurance because of what is called a “pre-existing condition” This can (and does) show up often in post-claim underwriting cases. The questions on the creditor insurance forms are generic, broad, and multi-dimensional, and since your mortgage broker is likely not licensed to sell life insurance they can’t even clarify any of the answers you are giving them. Many don’t require a medical exam.
What if you failed to disclose, through no fault of your own, an underlying medical concern you have seen your doctor about recently on your mortgage application, and died or suffered a disability 6 months later from that very condition? This happens.. and more often than you’d think, too. In this case, the mortgage insurance product may not have paid out, and the only thing you or your beneficiary would receive are the premiums you have paid for the insurance.
To add insult to injury, many policies are tied to the property and the bank itself so if you move or switch to another lender your policy typically cancels. You also have restricted options when picking a beneficiary (it’s usually the bank). Not to mention, this product is one of the most expensive types of insurance in the Canadian marketplace. In most cases, you can acquire the same amount of coverage or using a traditionally underwritten product and it will save you money and you will be insured at the time of the policy delivery.
Moral of the story? Save yourself a whole pile of money and a big headache down the road and speak to a licensed insurance advisor before you sign your mortgage documents. This may be one of the best decisions you can make for yourself and your family!
Talk to one of our licensed insurance advisors today about your options. You are under no obligation to buy and we provide as many personalized options as you’d like, or check it out for yourself using our online insurance calculator!
285-2366 Avenue C North 306-242-9056