Mortgage Insurance: Why the Bank is Not a Good Option

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Don’t get mortgage insurance
from a bank.

The one place you should never buy mortgage insurance, meant to cover your mortgage in the event of your death, is a bank.

Paula Cook, account manager for Bingham Group Services Corp. and a Certified Heath Insurance Specialist, has a very good reason for that.

“The Banks have fundamentally flawed products. They all have questions, or ‘Good Health Declarations’ in them. This leads to ‘Post-Claim Underwriting.'”

What’s so bad about Post-claim Underwriting? Post-Claim Underwriting means 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 her medical history.

If they find any discrepancies, the beneficiary could be out of luck and the bank might decide the insured should’ve never qualified for coverage in the first place. This means the insurance policy you’ve been paying into for all of these months may not even be yours when you or your family really needs it. You’ll probably get nothing.

In addition, the coverage declines over the life of the policy instead of remaining level. The insurance is owned by the bank, not the insured, and the insured cannot name a beneficiary. If the insured decides to leave the bank and choose a different lender, the insurance doesn’t come with him; it’s not portable like individual mortgage insurance would be.

A better option would be an individual, more traditional mortgage policy, but if you don’t want to have to answer the health questions or go through the medical tests, Paula Cook has another option for you.

“Bingham Group Services Corp. has the only No Questions-Guaranteed Issue Mortgage Insurance Product in Canada. It is singularly unique and a radical development,” she says.

“Nobody is ever declined from some meaningful scope of life insurance protection — ever. It does not matter what the customer’s medical history is and it does not matter whether they have been declined or rated before. If they want protection, then they can have it — instantly and without delay.”

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  • Mitch
    May 29, 2013 at 1:51 pm

    I just quote a young couple, both non-smokers, a Term 20 policy that was cheaper than the bank. And considering he has meds for high blood pressure and cholesterol, the banks policy would probably never pay out should he die and they conduct post-claim underwriting. When I upped the coverage to $500,000 they were more in line with the banks premium, but had doubled the amount of life insurance they would get. What a better option!!

    • LSM Insurance
      May 29, 2013 at 2:01 pm

      Thanks for sharing Mitch

  • Margaret
    May 29, 2013 at 4:15 am

    Thanks for the post. To my opinion, it’s very good that today we have many alternatives to banks available. In case you want to make one or another financial move it’s not necessary to apply to the bank because there are other ways out which will even be more suitable. If you consider mortgage insurance then I think it’s better to apply to reliable insurance company and ask what they can offer. But before signing a deal it’s worth to find several different options and check which of them suits you the best. Margaret

    • LSM Insurance
      May 29, 2013 at 1:32 pm

      Agreed in most instances individual insurance provides a better deal

  • karl
    June 5, 2012 at 9:36 pm

    The mortgage insurance is basically for the bank to recover the balance amount of the mortgage so that they are not at a lost upon death of the mortgagee.Sure enough it is expensive.

    The banks are not fools that claim by them could be questioned.

  • Mitch
    May 7, 2012 at 10:10 am

    Who would want to pay premiums for an insurance policy that aren’t even approved for? How can the banks be charging people a premium for an insurance policy they will possibly decline coverage on? This is so wrong and people need to stop trusting the banks.