Perils of a mortgage life policy

April 23 2007 by Ellen Roseman

In my article I left out an important point. It has to do with how successful you will be if you have to make a claim.

A term life insurance policy that you own personally is medically underwritten up front. So, if you die and your family makes a claim, the life insurance proceeds are guaranteed to be paid out — and in a timely way.

But if you buy the lender’s life insurance, the in-depth underwriting begins at the time you make a claim. If there’s a medical condition found after the fact, the claim process can be delayed significantly. And you may not be able to claim at all, if there’s a pre-existing condition or cause of death.

Check out the warning by CBC Marketplace in its analysis of credit life insurance for cars. It says buyers may be paying premiums without being qualified to receive an insurance payout. To make sure insurance isn’t being sold to you if you don’t qualify medically, you should discuss pre-existing conditions with the insurance seller or the company that underwrites the policy.

5 comments

  1. Paul

    Apr 25 2007

    When I purchased my insurance, the bank was offering a policy for over $30 per month. I opted out and purchased it through my employer for half the amount and with a higher value.

  2. MillionDollarJourney.com

    Apr 28 2007

    Great post Ellen. When I bought my first home, I stuck with the bank mortgage life insurance because i was cheaper than typical term life (CIBC). Perhaps I should take a second look at the policy for the stipulations.

    FT

  3. Carole Russo

    May 11 2007

    Thank you for your articles. I am a financial advisor with Sun Life. Clients do not understand the importance of understanding insurance coverages, the difference between an underwritten policy compared to group or association insurance. Many times clients will receive the payout from their individual insurance policy and not from insurance purchased through a financial institution, group or association. Clients may only have accident insurance not realizing if they die of an illness there will not be a payout. Unfortunately, the beneficiaries lose out. Please continue to keep the public informed. Regards, Carole Russo.