The Toronto Star Analyzes Job-Loss Insurance

On Oct. 16, 2006 BMO Bank of Montreal became the first bank in Canada to offer Job-Loss insurance through two new products that provide creditor protection against disability and job-loss for customers that have personal, student and homeowner lines of credit.

Functioning similar to a loan, both products help customers cover their payments on regular lines of credit  in the event those become injured or disabled. The “Plus” in Disability Plus means additional coverage in the event the customers can not make their payments due to involuntary job-loss.

Of course, Job-Loss Insurance has gone through a recent upswing in popularity thanks to the recent economic slowdown. Sure, people want protection against the unexpected, but is it really worth it?

Toronto Star reporter James Daw looked at Job-Loss Insurance from Bank of Montreal and Manulife Financial in his June 2, 2009 article:

BMO and Manulife pair job-loss coverage with disability insurance. This adds to the cost of coverage, while increasing the potential value to some buyers, and not others.

Manulife goes even further: It requires the borrower to buy life insurance on the loan. You may already have, or want, a free-standing life insurance policy that would offer more flexibility and control, while lasting longer than the loan and possibly costing less.

Both job-loss insurance policies come with conditions for coverage and maximum payment limits. The policy from Bank of Montreal [underwritten by Sun Life Financial] has more conditions that add to the complexity of the purchase decision.

-James Daw, Toronto Star. 

Daw goes further, in referencing the myriad of exclusions. “You can not know, when you apply for coverage, you are about to lose your job. If you resign voluntarily, retire, go on pregnancy leave, or get fired for cause, you will not be able to collect the benefits. Both policies make you wait to collect; 30 days at Manulife, 60 days at Bank of Montreal.”

You also have to make sure you’re not too old for the plan. “BMO will not pay job-loss benefits to those past the age of 54…while Manulife will pay until 64. The Bank of Montreal policy requires you to be with the same employer for at least 6 months,” says Daw.

Daw says the cost of this coverage isn’t cheap either. “BMO’s cost of job-loss, plus disability coverage, for a single person is four dollars for every $100 of a monthly mortgage payment, seven dollars for a couple…it’s like adding four to seven percentage points to your interest rate. If your mortgage happened to be $1,000 per month, coverage would cost you $480 to $840 a year. Manulife’s charges vary by age and the outstanding [credit] balance rather than the monthly cost.”