CBC Marketplace investigates mortgage insurance, Post claim underwriting for mortgage insurance

CBC Marketplace “In Denial” – Mortgage Insurance

CBC Marketplace takes a deep dive into mortgage insurance with the investigative report “In Denial”.

They take a look at what really goes on when someone decides to purchase mortgage insurance from a major Canadian bank.

CBC Marketplace poses an important question everyone should ask about mortgage insurance: how much are you really covered?

As I talked about in my latest Street Smarts video, mortgage insurance pays off your mortgage should you become sick or pass away.

That way, insurance payouts will go to you or your loved ones instead of going to the lender.

Medical questions and monthly premiums

CBC talked to two households who purchased insurance, which cost them somewhere between $20-45 a month. They showed the easy sign-up process. When they took out or renewed their mortgage, they answered a few simple “yes or no” medical questions and started paying monthly premiums.

However, when one woman’s husband suddenly died of a heart attack, and the other woman’s husband became sick with cancer, the insurance company denied their claim.

Why? How?

Post-claim underwriting

It’s all a part of a process called post-claim underwriting.

In some states in the U.S., it’s illegal. In Alberta, they made it mandatory to become licensed before you can sell mortgage insurance.

Post-claim underwriting is when they examine your medical records only after you file your claim.

Many people think they’re covered

This means the bank is collecting premiums from people who don’t even qualify – but because the questions on the medical questionnaire are confusing, it leaves many people thinking they’re covered when they really aren’t.

Jim Bullock, who has been in the insurance industry for 35 years and fights for families to get paid out for their mortgage insurance, says the questions are made to trip you up. “[There is] virtually no chance of doing it accurately. I haven’t seen anybody do it,” he says.

What should you take away from this program?

That buying mortgage insurance is very easy, but understanding if you’re actually covered is fairly difficult. Take your time filling out the medical questionnaire and ask questions if you have them. Make sure that when it comes time to file a claim, you have properly understood what is – and isn’t – covered.

To see a shortened version of the episode, watch below:

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Download our handy chart to see the differences between bank mortgage insurance and self owned mortgage insurance. Bank vs Personal Mortgage Life Insurance.