Mortgage insurance If you bought mortgage insurance from your bank – plain & simple you are being ripped off.
When you buy your first home and arrange your first mortgage like most Canadian’s you will be asked by your financial institution if you wish to purchase mortgage insurance. Many Canadian’s make the mistake of buying the coverage thinking that they are protecting their family. Bank mortgage insurance may be the worst financial decision you will make in your entire life.
Mortgage insurance is typically provided by your mortgage lender with one purpose in mind; to protect the bank. Banks are in the business of protecting themselves, not you or your family. By buying mortgage insurance you are buying a life insurance policy that is owned by the bank and the bank is making themselves the beneficiary – not your family.
Is mortgage insurance a good deal? NO! Not when you know the truth.
At first glance mortgage insurance looks cheap, but it’s not. Mortgage insurance only covers the outstanding balance of your mortgage so as you pay your mortgage off over time, the amount the policy pays drops; however, your premiums stay the same. Essentially you are paying a higher premium each and every mortgage payment you make.
With mortgage insurance you can’t adjust your coverage or change to a different type of plan as your needs change. The fact is because the bank is the owner they are in the driver seat. In some cases, the bank can cancel your coverage when they see fit.
Mortgage insurance stays with the bank. If at your mortgage renewal you find a better mortgage rate at another financial institution you lose your mortgage insurance and have to reapply. Given how often people move in our times, this is a significant inconvenience and you risk higher costs – and you may not be able to get new coverage at all if your health situation has changed.
Furthermore the death claims for bank mortgage insurance is not handled the same way as personal life insurance. What the banks do at death has actually been outlawed in Quebec. For the remaining Canadian provinces and territories the banks do not qualify or medically underwrite your insurance at the time you buy the insurance. They only see if you qualify for the insurance coverage at the time of death, so if you have had any medical problems or are over-weight they may find that as a loophole to renege on the contract. The bank is only obligated to refund the premiums you have paid.
Your beneficiaries most likely will lose the home. It’s ruthless, it’s heartless and it’s legal.