Understanding the Risks of Bank Offered Mortgage Insurance Protection

– Hey there, this is Brendan
Stoneman with RE/MAX Kelowna and I’m talking to financial
advisor, Tom Gaymer. All right, so around the time
people are buying a property I find is when they start
looking at life insurance options and those types of things. And I know that most
of the lenders or banks have a credit or protection or a mortgage life insurance
product which essentially, you take it if you die, the mortgage gets paid
out, so there’s obviously, I’ve heard pros and cons
to this type of coverage so I just wanted to chat with
you about your thoughts on it. – Sure. So, pros is fairly easy. Pros is it feels quick and it feels easy. Done. – [Brendan] Tick a box. – Tick a box, done. Maybe tick three or four and done. In reality what that initial ease and that upfront ease,
actually creates something potentially a lot more
difficult down the road. What they’re gonna do is they’re gonna get you on something, usually on something called post-claim underwriting. Which means they’re gonna
do their due diligence as to whether you should or
shouldn’t have the insurance on the back end. So someone passes away,
then they assess medically whether or not they
should’ve had the insurance. – Okay, so that’s when they
start doing their homework and going through medical
records to determine whether or not you’re covered. – Exactly. – [Brendan] Okay. – There are two main,
easy points as to how they typically catch somebody out. First one is, have you ever been tested for high blood pressure? – Okay, I don’t think I have. – Okay, if they find a
cuff reading anywhere in your medical records, by
default you’ve been tested for high blood pressure. Your insurance has now got a void, but your loved ones will
get the premiums back. – So they get the premiums back, but not the mortgage payout
that they were anticipating. – [Tom] Exactly, exactly. – Crazy, okay. And — – The second one. – Yeah what’s the — – The second one’s a fun one. Have you ever had or been treated for a gastrointestinal disease? – I don’t think so. – If you’ve ever had the runs (laughimg) or food poisoning or Montezuma’s revenge, and you’ve had to see a doctor, non-void. – No way. So all along you’re paying your premiums, thinking you’re protecting your family and something happens and their potential for it not to pay out and you’re left. So you said you get the premiums back? – [Tom] Yep. – But, you keep paying your mortgage like you did before. – Yep. So now imagine if your
loved ones can’t afford those mortgage payments. The bank is gonna repossess your home. – Unbelievable. – So another big concern when it comes to credit protection, is
actually what’s happening every time that you’re paying
back part of your mortgage. So every time you make a mortgage payment, that says you’re going to be decreasing the value of your mortgage. – [Brendan] Right. – Do your insurance premiums
go down with that as well? – I’m assuming not. – No they don’t. So what you’re actually
doing is you’re paying a level premium for decreasing benefit. That just doesn’t make
sense to the consumer.

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