Buying a house can be a stressful and exciting event. It’s not surprising, then, that first-time buyers can inadvertently sign up for something they may not need—like mortgage life insurance.
Clients know about their mortgage payments and property taxes, but they weren’t sure if they had insurance for the mortgage. If something happened to one of them, how would they pay it off?
Inadvertently buying mortgage life insurance is a common occurrence. (Mortgage life insurance is also called mortgage protection, creditor insurance or simply mortgage insurance, but it’s different from mortgage default insurance or CMHC insurance, which protects a lender if a homebuyer who makes a down payment of 5% to 19.99% can’t pay the rest of the mortgage.) As first-time homebuyers, the couple was new to the mortgage process and waded through a lot of options, but didn’t talk about insurance with the bank.
Bank employees are often “simply checking off a box on the application”. The clients don’t discuss their health or disclose any pre-existing health conditions like diabetes or heart disease; the bank doesn’t demand a medical examination or medical records.
This is crucial because for clients, who already have diabetes and later died of a heart attack, the bank would not pay the death benefit. That would leave the widow(er) on the hook despite having made all the monthly payments.
Banks stress the ease of buying this insurance, which is strictly voluntary, without the need of medical exams. That can be helpful for people who cannot otherwise get insured, but for others, it may not always be the most cost-effective option. We ensure we have options for our clients when it comes to Life Insurance to make sure they are provided with what suits their needs best.