Brokers criticize mortgage life insurance

Brokers criticize mortgage life insurance

Brokers criticize mortgage life insurance

Several broker joined the fracas to discuss their own issues with bank-offered mortgage life insurance, with many criticizing the high mark-ups and low payouts.

“The markup on bank-issued MLI is 2,500 per cent to 4,000 per cent,” Lior Hershkovitz of Mortgage Edge wrote on MortgageBrokerNews.ca. “Mortgage life insurance is a cash-cow for financial institutions because the payout rate is ridiculously low.”

For some, the fact that banks don’t spend enough time explaining the details of how the insurance works is the biggest issue.

“Not saying insurance is a bad thing but clients are never properly informed. Insurance companies are very good at explaining what is covered, but hide the details on what is not covered,” Brad Currie of Verico Versa Mortgages wrote. “They always stack the deck in their favour.”

Talk soon turned to personal anecdotes, when one broker mentioned a client of his who may have been taken advantage of the bank because English wasn’t his first language.

“This Italian Immigrant struggled a little with the English language so he checked one question yes then scribbled it out and checked no,” Russ Robideau commented. “The bank's insurer ruled that since he had effectively answered yes and no the claim was denied. These insurance questions seem not to be well explained by bank mortgage staff and I'm not sure why.”

For his part, Hershkovitz believes the lack of oversight encourages lenders to hock this type of insurance so willingly.

“The lenders continue to collect the premium from the borrower fully knowing that in the vast majority of cases the claim will be rejected,” Hershkovitz wrote. “This type of insurance is not regulated and this is why it is pushed aggressively.”

Related:

Bank denies mortgage life insurance claim

7 Comments
  • Frank 2014-07-14 11:39:36 AM
    The banks like all insurance companies have an obligation to payout on a claim and the banks do pay out millions per year. In saying that, like all insurance companies I believe they do look for those loopholes to see where a payout could be refused. Is that not common practice in insurance? I don't want to speak out of turn.
    The banks also heavily mandate their branches and mortgage reps to sell insurance with a minimum of around a 32% acceptance rate or they can lose their bonus, company ranking, be put on bad lists, even their jobs, etc.. I disagree with that. Yes, the banks make a lot of money on their insurance products and most of those selling it are not knowledgeable enough to do so, likely due to not taking the time to properly learn the products and explain fully to their clients.
    Post a reply
  • Vejai Etwaroo 2014-07-14 12:06:42 PM
    In my opinion, the bank should do banking business and leave all the insurance business to the insurance companies. I am an Insurance broker and I advise my clients to buy term insurance to cover their mortgage loan instead of the Bank Mortgage insurance which only cover for the period of the Mortgage loan, example 5 years, upon renewa,l the premiums increase based on the attained age and health. If they go to another institution for their mortgage they have to requalify and pay premiums at the attained age. With the Term Insurance I offer to my clients I give them a long term of 5 years to 25 years depending on what they can afford. These term insurance are guaranteed renewable without health requalifications; and is based on the age attained for premiums which is guaranteed from the beginning and not when it is ready to be renewed. 99.9% of the Mortgage Insurance cases I do, I sell universal life insurance that gives the clients a Life Insurance coverage for Life and include a living benefit along with investments. I do a cost analysis for each of my clients showing them the benefits of the Universal Life insurance versus the Term Life versus the Bank Mortgage Insurance. With the Insurance I offer, they can renew thier mortgage with any financial institution and not worry about requalifying again even if they have health problems. Insurance bought through me from the Life Insurance companies are in 99.9% of the cases subject to a meidcal report especially for mortgage purpose die to the amount. It is fully underwritten by the insurance company when applied for and not when a claim is made. What this meas is that their claim cannot be denied when it is made because it was fully underwritten when applied for.
    Post a reply
  • Vejai Etwaroo 2014-07-14 12:06:47 PM
    In my opinion, the bank should do banking business and leave all the insurance business to the insurance companies. I am an Insurance broker and I advise my clients to buy term insurance to cover their mortgage loan instead of the Bank Mortgage insurance which only cover for the period of the Mortgage loan, example 5 years, upon renewa,l the premiums increase based on the attained age and health. If they go to another institution for their mortgage they have to requalify and pay premiums at the attained age. With the Term Insurance I offer to my clients I give them a long term of 5 years to 25 years depending on what they can afford. These term insurance are guaranteed renewable without health requalifications; and is based on the age attained for premiums which is guaranteed from the beginning and not when it is ready to be renewed. 99.9% of the Mortgage Insurance cases I do, I sell universal life insurance that gives the clients a Life Insurance coverage for Life and include a living benefit along with investments. I do a cost analysis for each of my clients showing them the benefits of the Universal Life insurance versus the Term Life versus the Bank Mortgage Insurance. With the Insurance I offer, they can renew thier mortgage with any financial institution and not worry about requalifying again even if they have health problems. Insurance bought through me from the Life Insurance companies are in 99.9% of the cases subject to a meidcal report especially for mortgage purpose die to the amount. It is fully underwritten by the insurance company when applied for and not when a claim is made. What this meas is that their claim cannot be denied when it is made because it was fully underwritten when applied for.
    Post a reply