Beware of Post-Claim Underwriting in Bank Mortgage Insurance Policies
Like most Canadians, your home is often the biggest family asset you have and it is financed with a mortgage. Mortgage protection insurance is a popular life insurance option, commonly raised by the mortgage specialists at the time when arranging the mortgage at a bank or credit union.
Mortgage protection insurance is a type of term insurance policy designed to protect your home if you are unable to make your mortgage payments due to death or serious illness or disability. The premium is established at the time when the mortgage insurance is set up and may be determined by factors such as the amount of mortgage, age, and health. For any eligible claim, the policy is paid out. The policy benefits are not subject to income tax and they do not have to be reported as income to the CCRA.
A critical feature to be aware of with obtaining mortgage life insurance from a bank or credit union is whether the underwriting (eligibility of coverage) is done before or after a claim is made. The difference can affect whether or not you are covered by the mortgage insurance plan that you sign up for and pay each month.
When you buy mortgage life insurance from your lending institution or bank, your coverage is not guaranteed; the only thing set is your monthly premium payment amount. Your actual eligibility for coverage is not determined at the initial stages when you submit your application and instead is reviewed only when your spouse needs to make a claim. This is the post-claim underwriting process, which means that your eligibility for a claim will only be ascertained after your death, when your family makes a claim on their policy. This eligibility assessment may happen years after paying the premiums and there are no guarantees for coverage as the CBC Marketplace segment on mortgage life insurance outlines.
Unfortunately, when you complete an application under post-claim underwriting, you may learn that you were not eligible for mortgage protection coverage in the first place. Or, you may have inadvertently failed to disclose a medical condition on your application which negates your eligibility for coverage. Further, you could become ineligible if you completed the questions inaccurately because they seemed vague and unclear. You may have failed to disclose common situations such as having seen a physician in the past for vomiting or diarrhea or failed to disclose that you were tested for a common ailment such as high blood pressure or elevated cholesterol. A mistake on a mortgage life insurance application can be considered fraud or misrepresentation by the bank and consumers are held responsible for the accuracy of the information provided. Unfortunately, fewer claimants receive mortgage insurance payouts that one would expect.
Seek Out Pre-Claim Underwriting
To ensure that you are covered by mortgage life insurance it is highly recommended that you obtain your insurance from a licensed Edmonton insurance broker who can arrange pre-claim underwriting. Pre-claim underwriting is a thorough process done at the time of the insurance application to determine your eligibility from the outset. Your insurance broker can go through each of the required elements of an insurance application to ensure that you are properly and legally representing your physical and financial status. Once you have been approved for a pre-claim underwritten policy, your coverage is guaranteed. Your broker will work to provide you with the insurance coverage you need and prevent the possibility of your family being left with no protection after you pass away or are unable to make payments due to an accident or illness.
Speak to an Independent Edmonton Insurance Broker
At HDF Insurance, we can look for a mortgage life insurance policy that adequately covers you. We are available to provide further information and can answer any questions you have about mortgage life insurance. We provide you with peace of mind knowing that you and your family are protected with coverage in the event of a catastrophic occurrence. Contact us in Edmonton for your mortgage life insurance quote from a licenced insurance broker. We work with multiple insurance companies and can get you the best coverage and rates. Call us today at 1-800-567-2048 or request a free quote online.