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Should You Invest In Mortgage Insurance?

If you do, read the small print

CBC’s “Marketplace“, Canada’s investigative consumer show, has met two families who bought coverage and thought they were protected.They believed that if they became seriously ill or died before paying off the mortgage,then the insurance  would pay off the mortgage.

WRONG

Rather than peace of mind and reassurance both claims were  denied when they became sick or died. The insurer stated that both families had lied on their initial application form.

A routine test at the doctor could be reason to deny your claim, if you don’t mention it. Had a cuff inflated on your bicep? That counts as being tested for high blood pressure.

The show makes these recommendations to ensure purchasing insurance that will really protect you:

Be sure you qualify.
There are many terms and exclusions associated with credit insurance policies. Learn what they mean and how they apply to you.
Call the insurance company directly (NOT the bank that sold you the coverage) for clarification about pre-existing medical conditions.
Call your doctor to clarify details of any pre-existing medical conditions you may be concerned about.

Know that you can get out.
You usually have 10-30 days to review your policy after the initial purchase (this is known as a “cool-down” or “free look” period).
If you have already purchased your credit insurance you can cancel anytime. Keep in mind, however, that you may lose premiums already paid.

Shop around.
Consider buying from a licensed insurance broker who will explore any medical issues upfront.
Consider buying or topping up an individual life insurance policy to cover your mortgage.

Know your coverage.
You may already have adequate insurance coverage through your work or other policies. Insurance experts say it’s better to buy one traditional insurance policy than purchase a number of small policies for a variety of products.

Be sure you need it.
The purpose of credit life mortgage insurance is to protect your loved ones from making mortgage payments if something were to happen to you. This type of insurance may not be applicable if you do not have any dependents who would need to keep your home if something happened.

Maybe John Grisham’s “The Rainmaker” wasn’t a work of fiction after all.

This entry was posted on Friday, September 25th, 2009 at 4:49 pm and is filed under Financing. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.

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