Cost Benefit of Mortgage Insurance

As most no doubt realize, banks are expressing a growing interest in expanding their operations into the life insurance business. Banks however, have been selling some forms of life insurance for years. If you are buying from a bank, you need to compare carefully how much you are paying.

The type of insurance banks have sold for years is called "creditor's insurance". This is typically used to cover any outstanding balance of a loan. The most common form of creditor insurance would be mortgage insurance, used to pay off the outstanding balance of your mortgage should you die. You do not have to buy mortgage insurance to do this.

If you wish to decline the bank's mortgage insurance, and arrange for your own term policy to do this job, you are entitled to do so. There is a common myth that bank insurance is cheaper than what you pay if you buy coverage from a life insurance company. Many are paying too much at the bank and they need to shop and compare price.

Apart from price comparison, there are other differences between a mortgage/creditor life insurance policy through your bank, and your own policy direct from a life insurance company.

Insurance Company Plan Bank or Trust Co. Plan
1. The Plan is yours! It's Portable. If you move to a different bank for a better mortgage rate you don't have to apply for the mortgage insurance again. Coverage is under a group plan, Theirs! It protects their interests. You too benefit indirectly but without options.
2. You control your Plan.. The bank owns & controls the operation of the plan.
3. Plan premium rates guaranteed in advance. Cannot be altered. Group premiums can be changed on a group basis. Your rate may change when you start a new term. You may have to reapply and not qualify.
4. You may purchase any amount. The coverage is for the outstanding debt. As your debt reduces, your insurance decreases.
5. Your insurance plan, only you can cancel. The group plan can be canceled by the bank or by their insurer.
6. Your plan is portable. Not connected to the mortgage. At refinance of mortgage you need not re-qualify. The coverage terminate when you re-finance your mortgage, sell your house, pay off your mortgage, or if the bank forecloses.
7. You may upgrade to a more versatile plan regardless of your health. Bank Plans are typically not exchangeable to other forms of coverage.
8. Your Plan, you decide who benefits. Your beneficiary will receive the proceeds They decide to pay off all or some of the mortgage. The proceeds of a life policy are protected from all creditors, including a bank. The bank is the beneficiary and the proceeds automatically pay off the mortgage, regardless of your dependent's the wishes or circumstances.
9. If you insure both the husband and wife individually then both policies pay benefits in the event of both deaths. (our suggestion) If you and your spouse are both insured on a bank mortgage policy, then only one payment is made in the event of both deaths.
10. You are getting advice and purchasing protection from a licensed professional versed in risk needs analysis. Often a comprehensive strategy can incorporate debt protection like mortgage insurance. You are buying insurance like a commodity from a bank employee who may or may not be trained or licensed. Certainly their focus is lending with insurance being an "after market" profit generator.
11. Your personal medical and other insurability factors are kept private from your lending institution. A prudent business posture. The bank, on larger loans can be aware of your medical history. Would an adverse medical history jeopardize your negotiating posture with the bank? One wonders?!
12. Underwriting is done at time of issue Creditor plans do Post Claim underwriting

Even if the cost of the life insurance coverage

  • individual,
  • portable,
  • guaranteed rate
  • level benefit protection
  • creditor proof

was initially higher than that offered by the bank or trust company, it is clear that individual life policies are superior and worth the difference.

Many Canadians however, are usually surprised to learn, that they often end up paying the bank more than what you would pay if you purchased directly from the life company.

Check out our cost effective alternatives.~

With the Bank Plan - Are You sure you are covered?

Even if they take your premiums?

Here is an independent look at the Issue From CBC Marketplace:

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  • Ask yourself why you buy life insurance at all? Isn't it to have peace of mind?
  • I spent 20 years being a life underwriter assessing the very applications consumers submit to insurers.
  • Ask us about the details and implications of Post Claim Underwriting.
  • We'll tell you why the insurers let banks operate this way?
  • Ask us about the alternatives....

Then decide which is best for you.

Better yet.. ask us before you commit to buying a house and get all the options you have with

  • The mortgage
  • The mortgage insurance
  • The legal assistance for proper closing.
  • Less expensive and most beneficial course of action.

You've heard of buyer beware? We are here to make you aware.

We don't work for one bank, one insurer we lookout for our customers and clients.

Get in touch through our Contact Us

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