Thursday, July 30, 2009
Ok so you've just bought a nice new house. Your mortgage broker asks you "would you like the insurance with this mortgage? it will pay the cost of the mortgage if you or your spouse were to die." Thinking about this, you come to the conclusion that your mortgage lasts 25 years and who knows what could happen in that time. You give the mortgage broker the ok and he says "ok well I just need you to answer a few quick questions." He asks you five or six questions about your medical condition and history, you sign, he signs and off it goes. Do you even know what you just added to your mortgage?
The insurance added to the mortgage is essentially a life insurance policy with critical illness insurance added on as a rider. They charge you a monthly premium which is added to your mortgage payment. You don't even really know it's there.
The difference between the mortgage broker's insurance and life insurance is that life insurance is guaranteed. Mortgage companies do their underwriting when something happens, so if someone dies they find out if he was eligible for the insurance. If not they can decline it. Does that sound fair? What were those people paying money for? The kicker is they could have had life insurance for a similar monthly amount.
Life insurance is guaranteed. After you've got it, when you die, they can't decline you.
Here's a great look into what I mean.
http://www.cbc.ca/marketplace/in_denial/
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