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Mortgage Insurance Primer – Insurance Company vs. Lender offering

Mortgage Insurance is important to ensure that your family and loved ones are not additionally saddled with the ongoing obligation in the event of your premature death. There are significant differences between mortgage insurance purchased from an insurance professional like me or purchased from the lender when securing your mortgage. Starting with this post and continuing over the next two weeks, I’ll be sharing 4 key differences between the two.

Difference # 1

Individual Life Insurance

Underwriting at time of issue:

When you apply for individual insurance through a licensed insurance broker your medical history will be examined before a policy is issued and you start paying premiums. The insurance broker will ask detailed questions and may arrange for a nurse to conduct a physical. You will know whether or not you are covered from the beginning, before you start paying premiums.

Lender Mortgage Insurance

Post-Claim Underwriting:

Unlike individual life insurance, credit insurance sold by the bank is usually not underwritten until a claim is made. Consequently, even though you may have been paying premiums for years, the vendor company may determine you are not eligible for a payout at time of claim. For instance, a claim may be denied because an investigation of your medical records reveals that you once had high blood pressure or high cholesterol that you inadvertently did not disclose on the bank application.

Stay tuned for Difference # 2. If you want to have a conversation about, and/or review of your current strategies, please call (604) 607-3585.

Alexander ‘Lexx’ Potter

2 thoughts on “Mortgage Insurance Primer – Insurance Company vs. Lender offering

  1. Thank you for the very timely and thought provoking information regarding the difference between buying individual life insurance and lender mortgage insurance, Lexx.

    As an advisor to my clients, I’m always trying to explain the benefits of dealing with an insurance professional versus a bank employee. Your article clearly explains that the bank is trying to protect the bank’s interests – not you, the client.

    I’ll send your article to my clients as concrete illustration of the benefits of dealing with an insurance professional versus a bank employee.

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