Insurance should make you feel safe…If you have Bank Mortgage life insurance, you may not be.
Most Canadians have a Mortgage and almost all of us have been asked the question “Do you want Mortgage life insurance?”. We then hear about how inexpensive it is and if anything were ever to happen to us, we can feel safe knowing that the Mortgage has been paid off. But would it be? Are you actually getting a deal or paying for something that isn’t guaranteed? These are the questions you should be asking when composing your research in this area. If you are on the lookout for a regular life insurance policy then policyme will be able to help you.
Mortgage life insurance is an insurance product that the bank uses to protect their investment. Should something happen to you, the bank gets the benefit and covers the mortgage loan. In this case, the bank is the beneficiary, not your family. Would you rather have your family have the funds and decide what they want to do with it?
Mortgage life insurance is usually sold by the Bank Mortgage specialist who is not licenced to sell insurance. What most people do not know, is how it actually works.
A regular stand-alone life insurance policy is underwritten at the time of application. Once the client has undergone the application requirements and in some cases a Paramedical exam to be approved, you can feel safe that the Insurance Company did their job to make sure you were insurable. However, Mortgage life insurance is underwritten at the time of death. This means that you simply check off a few boxes and pay for something that you may not be covered for. Only after you pass away does the bank then do the underwriting process. You cannot simply buy life insurance, you must be approved.
You also pay even premiums but your debt goes down. So you pay the same, for less and less coverage and will only cover the Mortgage. What about any other debts or final expenses, living costs for the family, money for dependent child care, Taxes that beneficiaries may have to pay? In most cases, a stand-alone Life policy is actually less expensive.
What if you move your Mortgage to a new lender? Your insurance then stops.
It is worth it for anyone who has Mortgage Life Insurance to speak to a licenced Insurance Advisor and get a second opinion. The Advisor will be able to provide you with a proper insurance needs analysis and provide you with a quote on insurance that you can feel safe with….and isn’t that the whole point?
Aaron Cohen is a financial planner who helps his client make educated financial decisions in the areas of investments, insurance, mortgages, retirement, education and tax planning
Investors Group Financial Services Inc.
Phone: 416-860-1668 ext 514
Toll Free: 888-335-1362