Bank denies mortgage life insurance claim

Bank denies mortgage life insurance claim

Bank denies mortgage life insurance claim Brokers should warn clients of the potential pitfalls of mortgage life insurance, following one big bank’s negative press surrounding a claim denial.

Recently deceased Christopher Massa, whose mortgage and mortgage life insurance was with Scotiabank was diagnosed with lung cancer in October. The bank denied the claim on his $289,000 mortgage, according to the Toronto Star.

“The insurer declined Mr. Massa’s claim because he was not eligible for insurance coverage based on his health condition,” Sheena Findlay, a spokesperson for Scotiabank told the Toronto Star. “We understand that this has caused Ms. Massa frustration and we thank her for her continued patience while we investigated this charge.”

Scotiabank offers mortgage protection life insurance based on the age of the purchaser and the balance of the mortgage at time of purchase. Prices range from $0.09 per $1,000 of mortgage amount for someone aged 18-30 and $1.64 per $1,000 for purchasers aged 66-69.

According to Scotiabank’s website, approval for their bundled life insurance is a simple yes or no question.

“Approval is based on answering one health question. If you answer ‘No’ to this question and your mortgage is $500,000 or less you are approved,” the bank’s website reads. “Answering ‘Yes’ to this question does not necessarily mean you won't be approved; it simply means the insurer will contact you for more information.”

The insurance, which differs from traditional life insurance, is meant to act as a safeguard that will take care of an outstanding mortgage in case of death.

The bank claims Massa filled out the questionnaire incorrectly and ended up paying his widow $5,000 according to the Star.
  • Russ Robideau 2014-07-10 12:05:42 PM
    Interesting. The CIBC also denied the claim of one of my clients. This Italian Immigrant struggled a little with the English language so he checked one question yes then scribbled it out and checked no. 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. However, I now strongly suggest my clients talk to an Insurance Broker prior to making a decision on mortgage life insurance.
    Post a reply
  • Okanagan Broker 2014-07-10 12:10:52 PM
    Terrible time to find out someone is not covered...but a risk with any "mortgage insurance" that is basically underwritten/investigated at the time of claim. This is why I refer my all my clients to a Financial planner/Insurance Professional I trust & work closely with instead of just offering "mortgage insurance".
    Post a reply
  • Marvis Olson 2014-07-10 12:11:42 PM
    Banks don't seem to be held to the same standard as mortgage brokers---our rules are very clear & the paperwork goes thru audit before I can receive my commissions on a file.
    Post a reply