In the last few weeks I have been asked more than a few times to give my opinion regarding mortgage insurance from the bank.
Do you really need mortgage or line of credit insurance from the bank?
The answer is NO and here’s why…..
You have bought a new house or cottage and you are ready to sign the mortgage documents or the line of credit forms. It suggest that you accept the bank insurance with it. The purpose of this insurance is to pay off the mortgage or debt if something were to happen to you.
All you have to do is answer 4 questions…..
The problem is that your claim may get denied and you will not know until it’s too late. Claim denial is high and sometimes results in a paper nightmare. Those 4 questions you have basked do not automatically qualify your approval. Your case is not reviewed to see if you qualify for coverage until a claim is actually made.
The product attached with mortgage insurance does not give the best value for money. Mortgage insurance pays only to the amount of the outstanding balance of the amount owing, whatever that balance is.
Even with the principal of your mortgage being paid down, your premiums for the insurance do not decrease.
So you’re actually paying more and more for less and less as time goes on.
This leaves nothing extra for your family. The mortgage is the one and only beneficiary.
Rob Carrick, of the Globe and Mail has labelled mortgage life insurance “a junk product.” Last summer a case had hit the news when Scotiabank denied a claim on a $289,000 mortgage “because he was not eligible for insurance coverage based on his health condition.”
Carrick suggests “Buying insurance to pay off your mortgage if you die is a great thing to do for your family. Just buy it from an insurance company with competitive rates on term life policies. The coverage will most likely be cheaper than a bank-sold policy, and you pick the beneficiary. If you buy coverage from a bank, it gets the money should you die unexpectedly and your family has no say in how it’s used.”
The bank’s high costs, tight restrictions and questionable approval rate means you should choose the better and cheaper alternative: Personal Term Insurance.
I always please when I can help you save a few bucks and offer a better solution.
Contact me if you have any questions or would like to cost compare.