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.