Bank Coverage vs. Private Coverage. What you need to know! So let’s get on to a mortgage insurance discussion. Did I say mortgage insurance? Ah yes! Yes, it’s a unique name given to normal, ordinary life insurance, couched under a very nice sounding name – which makes a whole lot of difference to people wary of “life insurance.” So, they’re not buying life insurance-no, no, they’re buying mortgage insurance.
I wish there were many more such unique names for good old Life Insurance which would persuade people to buy life insurance and protect their loved ones and their estates. Apparently, people do not want to talk about death; so life insurance is the last topic for discussion unless you get a close call from the Creator, by way of a heart attack or stroke.
Mortgage insurance is not mandatory at your bank, or anywhere for that matter. And surprisingly, despite having this fantastic name to this very important plan there are thousands of families lacking protection and leaving their dependent families open to the risk of losing their homes. I am certainly glad that due to the plans aggressively marketed by the banks, many families are protected. If a mortgage is not paid immediately, in the event of your death, it will become a huge liability to the family.
Choices: Let’s visit the choices your family would have to make in such a situation.
1. Will the surviving spouse/partner carry on the entire burden of the mortgage and will the bank accept the risk? If two incomes together found it difficult to make both ends meets, how can one income possibly be adequate?
2. The family could sell the house, relocate or rent somewhere else. Will there be a buyer for the house? What about the cost involved in selling the house? Will there be enough money after selling or will the family owe the bank? Sell the house and move in with the relatives. Not the best alternative and how many people have philanthropic, generous relatives willing to take in another family?
3. It’s an accepted fact that for most people their house is their most valuable asset and they protect it by way of mortgage insurance. By the way, I’m sure you have heard this statement from a friend saying that someone they knew had died and that the surviving family does not have any money. You can immediately conclude that those folks did not have insurance and must have probably snubbed many insurance advisors like me.
A mere $15.00 a month can prevent such an eventuality if one truly loves his or her family. o Why take advice from a bank official, whose experience is not insurance? Before we discuss the nitty-gritty of the plans marketed by the banks and other lending institutions, let’s get one thing straight. Would you go to your dentist if you are ill? Or, would you go to your family doctor? True, both are doctors, but their lines of specialty are totally different. Why, then, would a person take advice from a bank official (whose expertise is banking and NOT insurance) to purchase protection of his/her most valuable asset? Don’t get me wrong-bank officers may be extremely knowledgeable in the financial aspects of banking related issues, but insurance issues are far beyond their scope. They are only doing their duty by offering the mortgage plans available. Getting advice and signing an extremely important document which can affect your entire family’s financial future is something you have to take really seriously.
An Insurance Advisor, on the other hand, is qualified to give you better advice on insurance related issues. o Plans offered by an Insurance Advisor provide coverage that remains level for the term you select. Mortgage insurance plans offered by banks relate to your mortgage balance, and obviously as your mortgage drops so does your insurance coverage. In this case, if you are happy about reducing your mortgage, remember that the insurance company is equally happy because this reduces their liability. Individually acquired plans are tailor made for you personally and so, if you are healthy, you get a better rate.
Unfortunately, the plans that banks recommend are group plans. It does not matter how healthy you may be compared to others in the group. o Plans we offer have premiums guaranteed and can not be changed by the insurer. As you might be aware, group plan premiums are generally not guaranteed. Mortgage insurance plans are group plans. o Individual plans do not reduce their benefits and so the premium remains the same. Mortgage insurance plans offered by banks relate to your mortgage balance, and as your mortgage drops so does your insurance coverage, as mentioned previously.
However, the premiums that the bank charges you remain the same. Does this seem fair? Most bank plans leave the insurance carrier with loopholes to decline your claim. o Individual plans will require complete medical check-ups done by qualified medical professionals, at the time of application, which will save your beneficiaries from problems later. It also protects your interests and the interests of your beneficiaries at a later date. Qualified Insurance Advisors will coach you on most medical questions so that your answers are accurate and appropriate. Most bank plans can be set up with a few condensed medical questions-which leaves your bank’s insurance carrier with loopholes to decline your claim. o Our plans do not require you to pay additional PST. The premium offered is the final figure, no PST surprise. Premiums quoted by group insurance plans do not include Provincial Sales Tax.
Therefore, just like the rest of your regular purchases PST sneaks in silently to add to your total. When you shop for a price, please take this into consideration. A PST of 8% could buy you a lot of additional insurance coverage OR reduce your cost significantly. With our plans, the premium offered is the final figure-no PST surprise. o The plans offered by an Insurance Advisor insure both spouses separately, and so, insurance is paid on both deaths, for instance in a disaster where both the insured die, two separate death claims in the same amount will be paid, thus doubling the benefit. Bank mortgage plans are “first to die” plans-i.e. the plans cease and pay when one person of the two insured dies. Obviously you would agree that that’s the purpose of this insurance. Sure.
However, wouldn’t you prefer a better option? : a 45 year old male and a 42 year old female insured for a mortgage of $250,000 “first to die” would pay $49.50 per month. That’s the advice you will receive from a qualified insurance professional. o The plans an Insurance Advisor offers can generally be converted to a permanent plan, without the necessity for further medical evidence. So if you develop a medical condition which would disqualify you for insurance, this feature would be of great importance in the continuation of your insurance policy, thus protecting your family. Bank mortgage plans are strictly rental (term) plans and that’s about it. You do not have a choice. o Our plans are traditional life insurance policies, the proceeds of which go to a named beneficiary tax free.
The insurance policies are creditor proof, thus totally negating undue expenses such as probate fees. Those proceeds may be open to probate or creditors when insurance proceeds from a bank plan are paid towards a property. o With traditional life insurance plans, the choice of coverage amount is always yours and does not require mortgage documentations. Again, as the coverage of bank plans relates to your mortgage balance, you do not have a choice. If you wanted an extra amount of coverage to protect your family, you would need to purchase it from elsewhere and unnecessarily end up paying an additional amount of money by way of policy fees. o With the plans an Insurance Advisor offers, the choice of using the benefit amount anyway you choose is yours, and you can make any changes as and when you need. For instance, when you die, your spouse has the option of whether he/she wishes to pay off the mortgage in its entirety or not, as per the spouse’s needs at the time.
With a bank policy the bank is the beneficiary; your family has no choice. o Our plans are portable. They are not tied to any property. They are based on your life-not your house or any other asset. When you purchase a mortgage insurance plan from a bank, you are confining the coverage to a particular property; hence, the moving to another property requires another contract. o Refinancing does not affect the insurance plans that an Insurance Advisor will offer. Refinancing alters your mortgage balance and so the contract of a bank plan stands void. There will be a rate increase in line with your current age, with additional underwriting. You in fact may not be able to get insurance again as your health conditions may have changed. o We offer you choices of coverage ranging from 5 to 21 critical illnesses with the flexibility of purchasing the amount of coverage that you can afford.
You can claim two benefits separately-i.e. if the insured gets a critical illness and claims, then dies after the claim is paid, the death benefit also gets paid. I wish there were many more such unique names for good old Life Insurance which would persuade people to buy life insurance and protect their loved ones and their estates. Mortgage insurance is not mandatory at your bank, or anywhere for that matter. You can immediately conclude that those folks did not have insurance and must have probably snubbed many insurance advisors like me. Mortgage insurance plans offered by banks relate to your mortgage balance, and as your mortgage drops so does your insurance coverage, as mentioned previously. Premiums quoted by group insurance plans do not include Provincial Sales Tax.
