April 1 2009 by Ellen Roseman
Banks love to sell insurance as an add-on to an existing product.
Sign a mortgage and they wil ask you about getting life insurance and critical illness insurance at the same time. Just a small increase in your monthly payments.
Take out a credit card and they will try to sell you insurance to protect you if you can’t make the minimum monthly payments. Often, they give it free for a few months and give you the option of cancelling afterward.
Many people don’t know they have credit balance insurance, since they don’t believe banks use negative option marketing. The information about having to cancel the insurance to stop it is slipped into a package you get along with the card.
Sometimes, borrowers feel they have to buy the insurance or lose the loan. The banks make you sign a waiver form, saying you’re on your own if you get sick or die. Now that’s pressure.
What you may not realize is that banks do “post-claims underwriting.” This means they don’t check your medical history in advance. They just ask you a few questions and then decide, based on your answer, whether or not you qualify for insurance.
Only when you or your loved ones make a claim under the insurance do they contact your doctors and start checking into your medical history. Then, they may decide you don’t qualify for coverage — and in fact, you may never have qualified — despite having paid premiums for all these years.
If you don’t believe me, check the column I did about a couple in this unfortunate position.
Luckily, I helped them get the coverage they thought they had. But the bank insisted they were at fault for misrepresentation on their application.
I know that if you buy insurance from a qualified insurance agent or broker, the proper checks will be done long before you have to make a claim and face possible denial for being ineligible.