What’s The Difference Between Mortgage Insurance vs Life Insurance

Gary Wong: What’s the difference between mortgage
insurance and life insurance? Today we have insurance broker Adam Jung to
explain the difference. Welcome back. It’s Gary Wong from GaryWongRealty.com. I’m so excited today to have a special guest. We have Adam Jung, one of Canada’s most well-known
mortgage insurance specialists here with me today to answer the top five most pressing
questions that people ask me about mortgage insurance versus life insurance. So stick around to the end and we’ll handle
those questions and much, much more. So Adam, welcome to the show. I know you’re really busy and traveling around
the country. We’re so happy and glad to have you here. One of the most pressing questions the viewers
want to know is what’s the difference between mortgage insurance and private life insurance? Adam Jung: Thank you for having me. Yeah, definitely been a busy month, going
all over the place like Vancouver Island and Victoria … Gambier, I’ve been there for
a wedding … and the Sunshine Coast where I grew up. Gary Wong: Wow. Adam Jung: Exactly what you were talking about
with the mortgage insurance/private life insurance thing, there’s a lot of things that people
don’t know about what they’re purchasing, especially through the bank or their lending
institution. Gary Wong: So what are those key things then? Adam Jung: 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 it’s there
to cover in case of you or your spouse’s 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’s there
for the bank’s best interest. So it’s 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, it’s the bank. Or the lending institution, so if it’s your
specific company that your mortgage broker’s 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. Gary Wong: Okay. Adam, I’m a little bit confused. What is the main difference between life insurance
and mortgage insurance? Adam Jung: Well the main difference is, I
think, 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’re signing up for one, they’re going through the application. Gary Wong: Hm. Adam Jung: So for one, when you’re going in
there, you get your mortgage done, it’s your first mortgage … they’re going to maybe
pass the application to you saying, “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.” Most people might say, “Oh no, we don’t need
it,” 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’re signing up for, what type of product they’re getting. Gary Wong: So in other words, Adam, having
life insurance is just better than the bank insurance? Adam Jung: If you simplify it, I would say
so. I mean, having some sort of life insurance,
even if it is your mortgage insurance product, it’s still better than nothing. Gary Wong: It’s just more customized. Adam Jung: Absolutely. Gary Wong: I see, I see. And is it like significantly more expensive,
or … Adam Jung: Actually, the price is not the
biggest difference between the two. And actually the prices are –
Gary Wong: Oh, pretty similar? Adam Jung: Absolutely. Gary Wong: But the bank is just the budget
version of it. Adam Jung: Yeah, 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 product’s a lot different. Like I was saying with the questionnaire,
it’s really narrowed down to just a couple of questions. But they’re 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 it’s just, “Hmm, I don’t think so?” and then
they’re just kind of check it off. Gary Wong: Okay. Adam Jung: The difference between that is
what a really thorough life insurance application … You’re working with someone like me who
is a broker, who has experience working with different types of claims … You’re gonna
get narrowed down to one specific question like, “Do you have … Have you ever been
diagnosed with cancer?” It’s very specific. Gary Wong: 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, it’s less likely that you’d get your coverage. Adam Jung: Well, that is one worrisome part
is that when you are going through the application and it’s just passed along there as part of
that mortgage process, it’s not really talked about, it’s kind of rushed through. Really that life insurance application is
a lot more complicated than people think … Gary Wong: Ah, okay. Adam Jung: … With the underwriting, with
your private insurance policy, we’re going to make sure we go through all the proper
steps and make sure you understand those questions. Gary Wong: Okay. Adam Jung: Because you don’t want to have
a point down the road where you [inaudible: 00:00:02] 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 with me, for example, we’re going to make sure once you’ve got that contract,
there’s no way that that can be canceled or can get out of a claim. Gary Wong: Okay. Good, good. That makes sense. Adam Jung: Yeah. I’ll bring up a number for the audience and
I’ll tell you a little more about it later. But, 67. Gary Wong: 67? Adam Jung: I’ll tell you the importance of
that a little later on. Gary Wong: 67. Hmm, is that 67 claims per month, or is that
67 unpaid claims per month, or …? Can you guys guess what it is? Adam Jung: 67. Well, maybe I should give some background
to that. It’s not just me that’s part of Karl Jung
Financial Services, it’s also my father. Gary Wong: Okay. Adam Jung: And he’s been in the industry for
almost 37 years. And I’ve been in the industry for four years. So in that period of time, he’s probably sold
thousands of life insurance policies. Gary Wong: Okay. Adam Jung: And over that course of time, we’ve
had 67 death claims. Gary Wong: Wow. Did you guys get that? Adam Jung: And out of those 67 death claims,
can you guess the number that haven’t been paid out? Gary Wong: Let’s say, maybe, 10 percent? Like 6? Adam Jung: Zero. Gary Wong: Oh! All of them have been paid out. Adam Jung: All been paid out. Gary Wong: Amazing. Adam Jung: 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, it’s
done at time of claim. Why that’s significant is because at time
of claim, they’re gonna 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.” Gary Wong: Hm. Adam Jung: So that can constitute as fraud. And fraud is the number one reason why insurance
claims get denied. Gary Wong: Wow, Adam. So, you’re saying that people can get their
death claims denied? Adam Jung: It happens! Absolutely. And that can pinpoint to an investigation
done by CBC called mortgage insurance. So they have a video readily available on
YouTube if you want to check it out. And if you ever have any of your clients that
want to not just take my word for it but want to look up, investigate themselves, there’s
a great video on it. But to narrow it down more to what I mean
by fraud and what constitutes fraud, it’s 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, like
I said, is going to be based on around that time of when you –
Gary Wong: So if they get their insurance at the bank, they have a simple questionnaire,
leaves out a lot of details … Adam Jung: Yeah. Gary Wong: It sounds like to me it’s better
to go through a professional, who has a custom-tailored questionnaire, detailed, so nothing gets left
out. Adam Jung: Absolutely. Gary Wong: So, is that the most important
thing they need to know to avoid death insurance claims from being paid out? Adam Jung: Well yeah, and 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 Scotiabank, and they say, “Oh, no, my husband had mortgage insurance with CIBC.” So this hasn’t happened to me, but this happened
with a mortgage broker I spoke with. Gary Wong: Okay. Adam Jung: And he says one of his clients
thought they had mortgage insurance, but it was only good for that specific mortgage. Gary Wong: Oh! Adam Jung: So once they changed carriers,
they thought they still had coverage, but they really had to reapply again. Gary Wong: So it sounds like a lot of hassle. Adam Jung: It can be, yeah. There’s a lot of paperwork … If you’re 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’re
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. Gary Wong: So Adam, let me get this straight. So what you’re telling me is that, in order
to avoid these pitfalls, the people should just talk to a mortgage insurance professional
like you? Adam Jung: Absolutely! I couldn’t agree more. 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. Gary Wong: Oh rally? Adam Jung: Do you know that in Canada’s 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 licensed. Like I have a specific life and accident and
sickness license to sell life insurance, disability insurance, and [inaudible 00:00:01] insurance. I think that’s really important because, like
I said, with that application process, there’s a lot of wording in those contracts, and you
want someone walking you through that process, understanding, “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?” Gary Wong: So, you’re telling me that there
are some people selling life insurance out there who are not licensed? Adam Jung: Well the mortgage insurance product
– Gary Wong: Oh okay …
Adam Jung: You don’t need a life insurance license to sell the mortgage insurance product. So that person at the bank, or your mortgage
broker, for example … I think 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. Gary Wong: Mm-hmm (affirmative). Adam Jung: Before that, a lot of the mortgage
brokers I talked to 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.” Gary Wong: Yeah. Adam Jung: And, would you want to sell something
you don’t know? Gary Wong: Definitely not. Adam Jung: The one side of the coin for them
is that they’re making an extra buck off the selling it. They feel like some clients that don’t have
any coverage, at least they have something. Gary Wong: Hm. Adam Jung: 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. Gary Wong: So what should they be doing? Adam Jung: Well, they could talk to me. But obviously there’s a lot of different options
out there. I think going to the insurance broker is really
important, because you’re 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. So someone like who would work for Sun Life
for example … They’re only selling Sun Life products. Or, Freedom 55 is another one of those agencies,
London Life, that they sell a very limited amount of products. So someone like me, I have nine different
companies I can go to. Gary Wong: Hmm. Adam Jung: And also the biggest companies
in Canada. Gary Wong: So Adam, any absolutely key points
that the viewers must know before making a decision? Adam Jung: Sure. I touched on it a little bit at the beginning
of the video … 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’re
gonna set the term of the contract. So you’re 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 it’s called whole life. It’s 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. Gary Wong: Okay. Adam Jung: But the mortgage insurance product,
like I said, it’s going to be on the one person in the household, you might get two of these. And it’s going to be specifically for the
covering the mortgage. If you’re paying … premiums end up costing
you like 50 bucks a month, and that 50 bucks a month is what you’re paying over the course
of time that you’re 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’re still paying 50 bucks a month when
you first got the contract. Gary Wong: Hm. Adam Jung: So with a term product or a permanent
insurance product, you’ve locked in that rate for ten years, 20 years, 30 years, or a whole
life. And that rate’s not going to change until
that renewal at ten or 20. Gary Wong: Wow. I had no clue. Adam Jung: Yeah. That’s why I’m here. Gary Wong: So Adam, that’s a lot of information
for the viewers to digest, even for me. So, is there any sort of checklist or step-by-step
form where people can find out more information about this? Adam Jung: Well I have an article on LinkedIn
about this exact subject. I mean, this article we’ve been using on our
website for the past 12 years, so it something we’ve discussed with a lot of mortgage brokers,
realtors, clients alike … And then on top of that, that video earlier about the CBC
video about mortgage insurance. It’s called CBC Marketplace. So we’ll post a link on that. Gary Wong: Okay. Adam Jung: I’ll post a link to my LinkedIn. So I have articles on there. And also my website, which will be at the
blog, so … Gary Wong: Okay great! So, we’ll put it in the description below. As you know, this is the Everything Real Estate
Channel. Whether you’re buying, selling, investing,
or maybe you work in the real estate industry, we are the experts. So, post us a comment, ask us a question. You may be featured in the next video. Subscribe, comment below, and I’ll see you
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