Mortgage Insurance and Post-Claim Underwriting

Posted on June 8, 2009 in Life Insurance Canada News, Mortgage Insurance
a young family needs life insurance
Mortgage insurance
can be a trap

Creditor insurance is one of the most profitable products in a bank's line-up. Often sold using high-pressure tactics, many borrowers are backed into a corner and feel like they have to make the purchase or else lose their existing loan.

 

What many don't know is this form of coercive selling is illegal. A company is not allowed to provide a product or service on the condition that their customer purchase an additional product from the same, or a related company.

Banks also engage in Post-Claim Underwriting, meaning they don't check your medical history, they just ask you a bunch of medical questions and decide  whether you qualify, based on your answer, right there on the phone. It's at the time when a claim is filed that things start to unravel because it's not until after the insured dies that the banks finally begin phoning around to doctors and checking into their medical history. If they find any descrepencies, the beneficiary may be out of luck and the bank may decide the insured should've never qualified for coverage in the first place.

 

The practice is such a problem that CBC highlighted the pitfalls of Post-Claim Underwriting in a segment on CBC Marketplace called In Denial.

Banks engage in Post-Claim Underwriting, meaning they don't check your medical history. They just ask you a bunch of medical questions and decide  whether you qualify, based on your answer, right there on the phone.

Purchasing insurance from a qualified broker saves you the roll of the dice that comes with the slimy practice of Post-Claim Underwriting, since indvidual life, disability and critical illness insurance plans do their underwriting at the time of application. There are also additional benefits to individual insurance that a bank plan simply can't provide:

  • Level coverage

  • Portability

  • Customization with the length of your plan through either a term or permanent option.

  • You choose the beneficiary, the bank doesn't.

  • Many plans have a return-of-premium feature if a claim is not made.

If that weren't enough, bank plans are normally 30-40% more expensive than individual plans. You can get a free quote and compare for yourself using our Term Life Instant Quote Page.

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17 Comments

  1. sam kohen 07/14/2009 at 6:49 pm

    I live in Montreal. Quebec has some of the toughest consumer legislation in North America. When Insurance companies tried to play this game, the Quebec Court of Appeal very rigorously rejected these attempts, stating for example that the insurance company was treating the law as an ass, and acting as an ostrich by burying its head once it came time to honor claims. In both cases the Supreme Court rejected appeals of these decisions, which means that post claim underwriting is now illegal in Quebec.

  2. LSM Insurance 07/15/2009 at 8:45 am

    Thanks for your comment. Interesting insights.

  3. Rod J. Byrne 12/08/2009 at 6:45 pm

    message for Sam Kohen re: his posting, do you have the case names for the two Quebec Court of Appeal cases referred to in your posting? thanks.

  4. larry 01/28/2011 at 11:13 am

    Interested in mortgage insurance

  5. LSM Insurance 01/28/2011 at 3:06 pm

    Thanks for the note Larry. WEell be in touch by email soon. Regards,

  6. Pearly 04/21/2011 at 9:51 pm

    I am looking for an estimate on my mortgage insurance. Someone can call me anytime after 6:00 pm to discuss my options, Thanks.

  7. LSM Insurance 04/22/2011 at 12:02 pm

    Thanks Pearly – we are happy to help out and we will be in touch soon.

  8. Mary 06/21/2011 at 4:24 pm

    I am looking at getting mortgage life insurance.

    I already have Life Insurance with Manulife.

    Can someone give me a call.

    Thanks

    … … ….
    Mary

  9. LSM Insurance 06/21/2011 at 4:43 pm

    Thanks for the note. The premiums will depend on your age, smoking status and the plan type and face amount.

    We’ll be in touch soon.

  10. Donna 07/01/2011 at 12:22 pm

    Our mortgage lender didn’t give us any opportunity to look for mortgage insurance on our own. It was basically stated that we were required to have mortgage insurance and that they (our mortgage lender) would arrange it for us. Being first time home buyers, we had no reason to doubt what they were telling us and we trusted them to do what was best for us. After reading the articles in this web page, we now know differently and would like to find out if we are able to cancel our current mortgage insurance policy and go through a broker to find more affordable insurance. We currently pay $234 per month on a $168,000 mortgage.

  11. LSM Insurance 07/01/2011 at 3:08 pm

    Thanks for the note Donna. You should be able to cancel the plan through the bank. Assuming this is not CMHC insurance which protects the bank against default payments.

    We are happy to help with alternative solutions.

  12. kevin 08/15/2011 at 12:05 am

    Iam glad I read this. Iam buying my first home and Iam concidering putting 5% down through CMHC finance. At the credit union, my banker tells me I need mortgage insurance through CMHC . Is this not false and what should i have for insurance instead if so?

  13. LSM Insurance 08/15/2011 at 8:49 am

    Thanks for the note. The CHMC mortgage insurance protects the bank if you default. You short still consider insurance which covers you if you die or get sick or insured.

  14. Rufa 09/08/2011 at 8:25 pm

    My mortgage policy about to mature next month.
    My remaining mortgage amount is $100.000,do you think is still advisable to renew for 10 year term.
    Manulife just send the new price for 10 year term – will be forty four dollars per month.
    Please advise if is reasonable price.

  15. LSM Insurance 09/09/2011 at 12:05 pm

    Thanks for the note. Its hard to say if that is a good rate. The premiums will depend on the face amount, type of plan, age, gender, smoking status and health.

    Most insurance build a buffer into their renewal pricing.

    We will send you an email now. Regards, LSM

  16. Gerald 03/05/2012 at 12:56 pm

    I currently have a mortgage of just under $…. 00. This was renewed on …. . Would like to get mortgage now ti insure the mortgage.
    How much per month?
    Waiting for your reply.

  17. LSM Insurance 03/05/2012 at 2:38 pm

    Thanks for the note.

    The premium depend on your age, smoking status, type of plan and the policy amount.

    We will send you a separate email now.

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