What’s the difference between mortgage insurance and life insurance? the mortgage insurance/private life insurance thing, there’s a lot of things that people don’t know about what they are purchasing, especially through the bank or their lending institution So what are those key things then?, Some of the key things I think a lot of individuals don’t realize is that, number one, don’t even realize that they purchased life insurance So, the bank or the lending institution might call it mortgage insurance, Really it is life insurance, and its there to cover in case of you or your spouses passing, that mortgage is paid off. The big difference between something that you would own personally, and what the bank is offering, is that the bank product is there for the banks best interest.
So its there to pay off that mortgage And that’s what it should do, too Personally, you get to choose your beneficiary With the bank product, its the bank Or the lending institution, so if its your specific company that your mortgage brokers chosen, same thing So with that personal product, you can decide that it goes to your wife or your kids, doesn’t necessarily have to go to pay off that mortgage
the main difference between life insurance and mortgage insurance is, for the consumer to know is the fact that with the bank product or lending institution product, which they call mortgage insurance, is essentially life insurance A lot of consumers don’t even realize that, but they are signing up for one, they are going through the application, So for one, when you are going in there, you get your mortgage done, its your first mortgage are going to maybe pass the application to you saying, "e; Here, do you want life insurance in case you or your spouse were to pass away, and here’s a couple questions we want to ask to make sure that you qualify and Most people might say, Oh no, we don’t need it, and some people will go through that and just kind of skim through the answers and the questionnaire But they never really fully go through it and understand what they are signing up for, what type of product they are getting ,If you simplify it, having some sort of life insurance, even if it is your mortgage insurance product, its still better than nothing, Its just more customized. Actually, the price is not the biggest difference between the two And actually the prices are pretty similar? But the bank is just the budget version of it, just a little more stripped down You still have different things that One of the big key differences I think is important ,maybe a lot of the consumers don’t, is that with underwriting for both applications, the bank products a lot different Like with the questionnaire,
its really narrowed down to just a couple of questions But they are very broad in nature So there might be a paragraph long of, Have you ever , have you been diagnosed, tested for, taken medication for this ? And someone that’s not really that observant, or who have gone through a life insurance application before, they look at something like that and its , I don’t think so?, and then they are just kind of check it off Okay The difference between that is what a really thorough life insurance application You are working with someone who is a broker, who has experience working with different types of claims You are going to get narrowed down to one specific question like, Do you have or Have you ever been diagnosed with cancer? Its very specific. So at the end of the day, when it comes to claiming your insurance, if you only answered a couple questions in the bank application, its less likely that you would get your coverage. Well, that is one worrisome part is that when you are going through the application and its just passed along there as part of that mortgage process, its not really talked about, its kind of rushed through , life insurance application is a lot more complicated than people think . With the underwriting, with your private insurance policy, going to make sure we go through all the proper steps and make sure you understand , Because you don’t want to have a point down the road where fill out a claim that they have to go back and find out a bunch of tests or results that weren’t brought forth in the first application. So someone that’s going through the application process , making sure once you have got that contract, there’s no way that that can be canceled or can get out of a claim. So one of the big worries for people who are going through a mortgage insurance application is the fact that they do a lot of their underwriting , So underwriting is the process for where you get approved for insurance So that might involve a nurse coming in and doing urine or blood work, or filling out a questionnaire with you, Or getting doctors reports, or more thorough investigations With the mortgage insurance product, its done at time of claim Why that’s significant is because at time of claim, they are going to go back, review all that information, and they might decide, “Oh, we said you aren’t a smoker, but according to your doctor, around the time that you applied for the insurance application, at his annual checkup, you said you did smoke cigarettes “So that can constitute as fraud, And fraud is the number one reason why insurance claims get denied , people can get their death claims denied. But to narrow it down more to what I mean by fraud and what constitutes fraud, its knowingly leaving out information on your application, or telling an answer that you know is not true So how they can kind of figure that out So if they get their insurance at the bank, they have a simple questionnaire, leaves out a lot of details its better to go through a professional, who has a custom-tailored questionnaire, detailed, so nothing gets left out So, is that the most important thing they need to know to avoid death insurance claims from being paid out. there’s also been cases of people forgetting to get the new mortgage insurance product when they change lending institutions So now they move their mortgage from CIBC to Scotia bank, and they say, “Oh, no, my husband had mortgage insurance with “So once they changed carriers, they thought they still had coverage, but they really had to reapply again So its like a lot of hassle There’s a lot of paperwork If you are just constantly switching mortgages, which some people do, then that’s a lot of different applications to go through And there might be a point in time where you are no longer in good health, and you might not even be able to answer yes or no to one of these questions asked on the application. in order to avoid these pitfalls, the people should just talk to a mortgage insurance professional And for a lot of people purchasing that bank mortgage insurance contract People that are selling it aren’t even necessarily licensed to sell life insurance , Canada is one of the only places left in the world where someone that’s not licensed to sell a life insurance-type product like that can do so? Anywhere else in the world there’s no such thing as a mortgage insurance product You have to be license ,with that application process, there’s a lot of wording in those contracts, and you want someone walking you through that process, understanding, things like “What does this question actually mean? What should I be telling my doctor? When the nurse comes, what should I be bringing to that interview with the nurse? “
You don’t need a life insurance license to sell the mortgage insurance product So that person at the bank, or your mortgage broker, the rules have changed considerably I don’t think many mortgage brokers really sell the mortgage insurance product, and that’s happened over the past year. Before that, a lot of the mortgage brokers are saying, I don’t really feel that comfortable selling it, I don’t really even sell it that much because I just don’t know it And, would you want to sell something You don’t know? Definitely not .The one side of the coin for them is that they are making an extra buck off the selling it. They feel like some clients that don’t have any coverage, at least they have something But a lot of clients that do end up getting a mortgage insurance product, who should be talking to an insurance broker,are just content with whatever they have there, going to the insurance broker is really important, because you are going to be able to get different quotes from the plethora of companies out there so you don’t have to go with one specific carrier.
I think another really important thing to consider when choosing the type of insurance coverage you want is going to be the type of product So, with private insurance contract, you are going to set the term of the contract So you are going to say, “I want a term 10 or term 20 or term 30 “Or you might need something more permanent in nature, like people that buy whole life or universal life contracts that go the entirety of your lifespan That’s why its called whole life Its there for your whole life And some of these contracts might have cash value, some of them just might be pure insurance coverage, and some of them might have different features you can add onto it so like things like critical illness insurance or different Like you can add your children on, or your spouse, or have like a multi-life policy ,Those are only kind of things you can talk about with your broker, kind of design something more custom to you ,But the mortgage insurance product, its going to be on the one person in the household, you might get two of these And its going to be specifically for the covering the mortgage If you are paying premiums end up costing you like 50 bucks a month, and that 50 bucks a month is what you are paying over the course of time that you are still paying that mortgage insurance That mortgage is going to be going down in size. So, fifteen years in, but you originally purchased for $500,000 of insurance benefit is now only going to be many $200,000 of insurance benefit But you are still paying 50 bucks a month when you first got the contract So with a term product or a permanent insurance product, you have locked in that rate for ten years, 20 years, 30 years, or a whole life. And that rate is not going to change until that renewal at ten or 20 .