Do You Have Mortgage Life Insurance?

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Did You Read The Fine Print?

If you are like most people who have a mortgage, you likely applied for the mortgage life insurance offered by the lender because you would like that debt paid off if you passed away. You likely sleep a little easier at night with this assumption.

Did you read the fine print when you applied for the insurance? Did you read the medical questions carefully, consider each question completely and provide full and accurate disclosure of your medical history as it relates to the questions presented?

Unless you can answer yes to these three questions, you may be living with some false assumptions.

Creditor life insurance, or mortgage insurance offered by financial institutions do have limitations. Furthermore, there are generally a few statements you are supposed to read before signing. For example, the creditor insurance application from one institution indicates that by applying for the insurance you acknowledge:

  • You have read the section “Who can apply” in the Certificate of Insurance and you are eligible to apply for the insurance products you have selected.
  • You are bound by the terms, conditions, limitations and exclusions of the Certificate of Insurance. You understand that limitations and exclusions describe when benefits are limited or not paid at all.
  • You have read the health questions in this application and have answered the health questions accurately and completely.
  • You understand that your insurance will be void if you conceal, misrepresent or make any false or incomplete declaration in respect of any information given in connection with this application. No benefits will be paid if this occurs.

The creditor insurance application generally has only a few medical questions related to specific disorders. The application may also state “in the event of a claim, answers to the health questions may be reviewed”. This means, at the time of claim, the insurance company providing the coverage has the right to contact your doctor and obtain you medical history at the time of application to confirm that all of your answers on the application were accurate and complete. See the third bullet above for further details.

When you apply for regular term insurance through a licensed insurance professional, you answer dozens of medical and lifestyle questions. You will also likely have to “endure” further medical tests including blood work and urinalysis, and if you have any medical history the insurance company wants further clarification on, it will likely contact your doctor. When the insurance is approved, you know they have thoroughly considered you medical history and lifestyle, and you can rest confidently knowing your insurance is in place should disaster strike.

Furthermore, in all probability, regular term insurance is going to save you money. On one recent comparison I completed for a client, Level 20 Year Term (mortgage life insurance declines with your mortgage balance) with one of Canada’s largest insurance companies was half the premium they were paying for their mortgage life insurance through one of Canada’s largest banks.

Finally, mortgage life insurance can be cancelled at any time with 30 days notice. Given a choice, wouldn’t you rather have the security and certainty of regular term insurance? Especially when will likely save you money! Contact Pankow Financial Solutions to learn more.

 

Shawn

Shawn Pankow,
CFP, CHS, CLU

Certified Financial Planner

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