Personal Finance

Mortgage Critical Illness and Life Insurance?

  • Last Updated:
  • Apr 15th, 2013 7:58 pm
Banned
User avatar
Jul 16, 2003
10397 posts
1468 upvotes
Toronto
wesboag wrote: I can "sell" mortgage life insurance all I want and I am a financial advisor, but I don't. Declining balance insurance, where the premium always remains the same is robbery in my opinion. Coupled with the fact that if you need/when you switch lenders (which 99% of people will do) say goodbye to your coverage. Your premiums are re-set; your insurability is re-checked, hope that you are still insurable.
Wrong. Some providers allow you to port the insurance, not only the insurability. So the fact that the covered amount declines over time while premiums stay the same is robbery, but premiums that increase substantially every 5 or 10y to cover the same amount is not?!
wesboag wrote: With mortgage insurance, the bank is the owner, not the individual. I'm not sure about everyone else, but if something happens to me, I doubt my wife would want the bank saying what she can or can't use the proceeds for.
If you buy coverage to protect the balance of your mortgage, say 400k, what else do you expect the bank to do? If it was bought to cover the mortgage, it will be used to pay for it. This is why you buy $500k life insurance from an agent and 350k for your mortgage. If something happens, the house is paid for and the wife keeps the 500k.
wesboag wrote: The final issue is how it is sold. These individuals simply are not licensed insurance agents yet they are recommending products for the very purpose of protecting ones family. I don’t agree with it and I never will. I do not sell mortgages even though I can at my firm. It’s the same as I don’t think unlicensed mortgage agents should sell this sort of coverage even though they can. Again this is just my opinion. We can agree to disagree.
And that's why we dont sell "regular" insurance policies.

Now you mentioned in the previous post the following :

ALWAYS buy your life, CI and DI policies from an actual insurance company (or the banks insurance arm) as real independent policies. Do this through an experienced advisor, not some mortgage agent trying to pad their pockets or a financial services rep with nothing more than a grade 12 education and a sales target.


So you dont "pad your pocket" when you sell insurance? I get paid a ONE time compensation of 3 months premium, so if I sell a $100.00 monthly premium I get $300.00. How much do you get for that?
Andre Oliveira - Mortgage Agent
Mortgage Intelligence - FSCO# 10428
Deal Addict
User avatar
Apr 21, 2009
4201 posts
2228 upvotes
Niagara
laptop-tech wrote: I think you are missing the most important point in my post : one type pf solution does not cancel the other. Also, based on what are you saying that a mortgage life policy costs 3x more than a regular life policy? Got any examples on that? I have been in this business for almost 5y and I ALWAYS compare the costs, and life in most cases varies no more than 10%, up or down, compared to a mortgage option.

Also, keep in mind that paying the same premium for life on a decreasing amount (mortgage situation) is not much different than paying an ever increasing premium on the same covered amount. An contrary to what some people say, mortgage insurance is (from some providers) fully portable, so moving from lender A to B allows you to carry over the insurance premiums. Now some questions :

A - Can you point to an example where I can get a 30y term for a cost comparable to a mortgage life insurance?
B - Can you point out an example where the client can get his income replaced AND his mortgage payments (and property taxes) paid at the same time, without mortgage disability insurance?

About the mortgage not being the only debt, I agree 110% with you. And that's why clients should consider BOTH options. One more time, one product does not replace the other as they have different purposes. People have been brainwashed for too long to immediately say "no" even before they understand how it works. I remember seeing someone here post not too long ago that "you should decline it, because ALL banks do the underwriting AFTER you make a claim.." which is BEYOND ABSURD as many insurance providers will do the underwriting upfront.
I had my own real example in a previous post, but I'll specific numbers below.

This was for my wife and I:

Mortgage Life insurance for a 20 year amortization for $380K mortgage: $125/month.
Term Life insurance for a 20 year term for $1 million for each of us: $95/month.
Term Life insurance for a 30 year term for $1 million for each of us: $140/month.

I'm sure the numbers will vary from person to person, but they were quite similar for all of my siblings and a few close friends as well.
Banned
User avatar
Jul 16, 2003
10397 posts
1468 upvotes
Toronto
And I cannot comment of pricing for each insurance, as prices do vary from company to company. Indeed, based on your numbers I'd do the same you did. It just makes sense.

To set the record straight, each company works differently. I used to work for a major bank that had its own insurance arm, and our polices were priced VERY well (I always checked prices with RBC or other banks online to have a reference) and in the absolute majority of the cases (again - this was with one single bank I worked for) the premiums were 10% higher or lower than RBC, BMO, etc. In all fairness, I will say that life insurance for your mortgage is NOT the product I love, as the prices (as your example show) can be very close. But disability and critical illness, our prices were MUCH better than most providers out there, not to mention the additional benefits you cant get from a private disability policy. Most people these days are committing more and more of their income to cover housing costs, yet people believe that if they use the employer disability insurance they will be fine.. but most people never calculate how much income is lost if it drops 30% or 40%. Having mortgage disability can and will save one's life, as you will get your reduced income PLUS the mortgage and property taxes paid along the way, for up to 24 months. You cant get that from private insurance.

Now the whole point of my post was exactly to point out that people should consider and think carefully about both options, as they are not meant to replace each other. The same way that term or whole life do not replace each other. I personally have a combination of different policies with different lenghts and purposes. My mortgage is paid off, so I dont want that extra coverage. I already have another life policy for that.
Andre Oliveira - Mortgage Agent
Mortgage Intelligence - FSCO# 10428
Deal Fanatic
Mar 24, 2008
6278 posts
2753 upvotes
Toronto
laptop-tech wrote: I think you are missing the most important point in my post : one type pf solution does not cancel the other. Also, based on what are you saying that a mortgage life policy costs 3x more than a regular life policy? Got any examples on that? I have been in this business for almost 5y and I ALWAYS compare the costs, and life in most cases varies no more than 10%, up or down, compared to a mortgage option.
...
Yes, one type of solution will cancel all others. Get a term life policy with enough coverage to cover ALL your expenses. If I have enough insurance, why would I need both? Not sure what your logic is here.

When I said that mortgage insurance is 3x term insurance, I was figuratively speaking. Its almost always more than term life insurance. For an example, look at the premium Joey003 posted.
Deal Fanatic
Mar 24, 2008
6278 posts
2753 upvotes
Toronto
laptop-tech wrote: And I cannot comment of pricing for each insurance, as prices do vary from company to company. Indeed, based on your numbers I'd do the same you did. It just makes sense.

To set the record straight, each company works differently. I used to work for a major bank that had its own insurance arm, and our polices were priced VERY well (I always checked prices with RBC or other banks online to have a reference) and in the absolute majority of the cases (again - this was with one single bank I worked for) the premiums were 10% higher or lower than RBC, BMO, etc. In all fairness, I will say that life insurance for your mortgage is NOT the product I love, as the prices (as your example show) can be very close. But disability and critical illness, our prices were MUCH better than most providers out there, not to mention the additional benefits you cant get from a private disability policy. Most people these days are committing more and more of their income to cover housing costs, yet people believe that if they use the employer disability insurance they will be fine.. but most people never calculate how much income is lost if it drops 30% or 40%. Having mortgage disability can and will save one's life, as you will get your reduced income PLUS the mortgage and property taxes paid along the way, for up to 24 months. You cant get that from private insurance.

Now the whole point of my post was exactly to point out that people should consider and think carefully about both options, as they are not meant to replace each other. The same way that term or whole life do not replace each other. I personally have a combination of different policies with different lenghts and purposes. My mortgage is paid off, so I dont want that extra coverage. I already have another life policy for that.
Having critical illness and disability insurance will cover those things... why do I specifically need to have mortgage disability insurance. For someone who doesn't have a vested interest in selling mortgage insurance, you seem to be pushing it like a proper salesman.
Deal Addict
User avatar
Apr 21, 2009
4201 posts
2228 upvotes
Niagara
laptop-tech wrote: And I cannot comment of pricing for each insurance, as prices do vary from company to company. Indeed, based on your numbers I'd do the same you did. It just makes sense.

To set the record straight, each company works differently. I used to work for a major bank that had its own insurance arm, and our polices were priced VERY well (I always checked prices with RBC or other banks online to have a reference) and in the absolute majority of the cases (again - this was with one single bank I worked for) the premiums were 10% higher or lower than RBC, BMO, etc. In all fairness, I will say that life insurance for your mortgage is NOT the product I love, as the prices (as your example show) can be very close. But disability and critical illness, our prices were MUCH better than most providers out there, not to mention the additional benefits you cant get from a private disability policy. Most people these days are committing more and more of their income to cover housing costs, yet people believe that if they use the employer disability insurance they will be fine.. but most people never calculate how much income is lost if it drops 30% or 40%. Having mortgage disability can and will save one's life, as you will get your reduced income PLUS the mortgage and property taxes paid along the way, for up to 24 months. You cant get that from private insurance.

Now the whole point of my post was exactly to point out that people should consider and think carefully about both options, as they are not meant to replace each other. The same way that term or whole life do not replace each other. I personally have a combination of different policies with different lenghts and purposes. My mortgage is paid off, so I dont want that extra coverage. I already have another life policy for that.
It's not that the big banks don't have good rates, some were quite good, but it was always through the insurance branch of the bank.

I can appreciate what you're saying, and the real important thing is for someone to do their research - which I find rarely happens, most people just buy whatever they are "advised" to buy.
ksgill wrote: Yes, one type of solution will cancel all others. Get a term life policy with enough coverage to cover ALL your expenses. If I have enough insurance, why would I need both? Not sure what your logic is here.

When I said that mortgage insurance is 3x term insurance, I was figuratively speaking. Its almost always more than term life insurance. For an example, look at the premium Joey003 posted.
This I really agree with. I've helped several family members and close friends who really didn't understand any better, and purchasing a single product to cover all needs & debts was always cheaper than different individual products, especially any LI/DI/CI that the banks had sold them for their mortgages.
Banned
User avatar
Jul 16, 2003
10397 posts
1468 upvotes
Toronto
ksgill wrote: Yes, one type of solution will cancel all others. Get a term life policy with enough coverage to cover ALL your expenses. If I have enough insurance, why would I need both? Not sure what your logic is here.
.
The logic is that if you want 1 million payout to the family, it is great. Buying a house for 500k 3 years later takes away 500k from that payout, while you wont have that 500k liability forever, so why not keep your 1 million (so that your family can get 1 million, and getting 500k to cover a recently assumed debt? If you think 1.5 million is the answer, will you always need all of that? It will also cost you (logically) more to cover 1.5 mil than 1 mil. I will use my own example : married, no kids (and no plans to have them ever - so no one to leave the money to as the rest of the family lives overseas and is older than me) so what I wanted for the reassurance that while we are young if something happens to either of us, the other gets enough to move on in life... but as we paid down the mortgage entirely and will retire overseas, I dont need (or want) to cover that extra amount. Some people do this by buying a 10y term (to cover the mortgage) and a whole life to keep. I did essentially the same using a different instrument that was cheaper to me and since I paid the mortgage faster than anticipated it did not cost me extra.
ksgill wrote: Having critical illness and disability insurance will cover those things... why do I specifically need to have mortgage disability insurance.
Have you compared all disability costs from all banks/lenders to "regular" disability in order to know for a fact that you are better off with your regular insurance? I just calculated disability for a 350k mortgage, 30 years old male (non smoker) and the cost was $24.00, while critical illness was $51.00. These are monthly.
ksgill wrote: For someone who doesn't have a vested interest in selling mortgage insurance, you seem to be pushing it like a proper salesman.
As opposed to an insurance agent, who is not interested in selling insurance, right? Im not pushing anything, I dont even know the OP. What bothers me is that people here on RFD often give advice, not even knowing the facts. For instance, most people here will yell "run" because they think they understand how it works, when n reality they dont. When Im meeting a client, I show them their options and I never tell them to cancel or avoid their regular insurance through their agent. In fact, I encourage them to contact the agent to find a good solution. The problem is that the agent will meet the client, and before shaking his hand he will say "I hope you declined the bank's insurance.."
joey003 wrote: I can appreciate what you're saying, and the real important thing is for someone to do their research - which I find rarely happens, most people just buy whatever they are "advised" to buy.
This!
Andre Oliveira - Mortgage Agent
Mortgage Intelligence - FSCO# 10428
Deal Addict
User avatar
Feb 26, 2006
4627 posts
3267 upvotes
Ottawa
Why whole life over universal? And why either over term?

I'm being 'advised' to do 500k whole life, 500k term. Another advisor is saying 1m term, and then switch it to whole life in 25years or something.

Drawbacks of the latter strategy are?
Deal Fanatic
Mar 24, 2008
6278 posts
2753 upvotes
Toronto
wesboag wrote: Sorry, which lenders offer fully portable mortgage life insurance? Out of all the lenders out there that 99.9% of borrowers have mortgages with, I’d say 99% of them do not offer this. Not once have I come across this, unless it’s an actual 3rd party declining benefit policy with no real attachment to the mortgage itself. In this case, this is not what I am alluding to and these policies can have a purpose, but I doubt you are talking about this.

The increasing premium argument is irrelevant as one’s coverage remains the same; it isn’t zeroed out like it is with insurance attached to a mortgage. With companies like Manulife who offer term to 65 for a fraction of the cost of mortgage life insurance, why the heck would anyone buy mortgage life coverage? It makes absolutely no sense.

Example, Scotia’s mortgage protection for an individual who is 35 years old is: $65/month. So a couple would be $130/month, for the life of the mortgage regardless of what the balance is.

On the other hand, Manulife’s term 65 for this couple would be $106/month until 65.

In the latter case, the premium is 20% cheaper per month and the coverage remains level until 65, at which time it can be fully converted if a permanent need is there. Mortgage insurance is garbage, plain and simple.

When I recommend insurance, it is the BEST fit for a client’s situation, not just an OK solution or as an add on to a sale I just made. In no way does mortgage life insurance come out ahead of independent coverage when all is said and done and it is NEVER the best solution. I am yet to see an example of how it is better than independent coverage. The argument that one should have separate coverage’s for separate needs in the sense that one should have regular term life insurance for their income replacement and a separate policy for their mortgage is nonsense. Insurance in this case is all about covering your liabilities plain and simple.

I get paid for selling insurance yes, and I do make more than what you would get paid for your mortgage insurance, but I’m selling a far superior product in my opinion and I don’t think many people would disagree. I’m also a licensed advisor. It is my job first and foremost, like you selling mortgages is your job. Mortgage life insurance on the other hand is sold as a side to purchasing a mortgage. It’s a guaranteed sale for most mortgage agents as 99% of customers are completely unaware of what they require to protect themselves and what is available in the marketplace and at what cost. I don’t even believe that you guys get charged back if the borrower cancels the coverage after 3 months. For us, its 2 years minimum.

When I say pad your pockets, I wasn’t referring to you in general by any means, but when a mortgage agent has just closed a sale on a borrower, why double dip by offering an inferior product at a higher price when you know there is a much better product out there? You already got paid for the mortgage, why take advantage? This is what I’m getting at.
I didn't think that I would say this but Wesboag is spot on :-) Thanks!

As a consumer, as long as my liabilities are covered, why the heck would I want to have multiple policies? Mortgage insurance is bull-crap and you know it!
Deal Addict
Jun 29, 2009
2307 posts
213 upvotes
Toronto
laptop-tech wrote: If you buy coverage to protect the balance of your mortgage, say 400k, what else do you expect the bank to do? If it was bought to cover the mortgage, it will be used to pay for it. This is why you buy $500k life insurance from an agent and 350k for your mortgage. If something happens, the house is paid for and the wife keeps the 500k.
Why don't I just get $850k life insurance?
When something happens - the beneficiary can use $350k to pay mortgage, and keep the $500k leftover.

If I buy a mortgage life insurance, the "$350k" policy I purchased actually declining overtime, so I got nothing but lose-lose situation if I buy mortgage life insurance rather than regular life insurance.

Assuming at year 1-you already paid of $50k of your mortgage:

------------Independent-----------------Mortgage Insurance + Independent----
------------------------------------------------------------------------------
Year 1 ----- $850k ------------------------ $350k + $500k --------------------
Year 10 ---- $850k ------------------------ $300k + $500k --------------------

Not obvious that I am losing if i buy mortgage insurance yet?
Banned
User avatar
Jul 16, 2003
10397 posts
1468 upvotes
Toronto
So clients cant ever come out ahead with mortgage insurance?

Let's compare a case where 2 applicants, husband an wife, both work, he makes 60k she makes 30k. He is the one with a higher income and bigger contribution to the mortgage payments. He buys the insurance you sell, 2 policies (for him and his wife). On a 30% tax bracket, if the wife gets sick and is unable to work her 30k will be cut by at least 30%, so now he makes 21k (before taxes). Husband's income is not affected. They still need to pay the 2000.00 a month mortgage, despite the lower income, but let's assume they are "ok".

Now the same clients in the same situation, same income, tax bracket, mortgage payment, etc. Only the wife buys disability insurance, and since it is tied to the mortgage payment (not her income) the premium is lower than your offer, not to mention that the husband does NOT need to buy disability (even though he is the one giving the biggest contribution to the mortgage payment - the insurance covers the mortgage payment, not an individual's income), so when she gets sick, she will collect her 21k income, he is collecting his full income AND the bank is paying the 2000.00 mortgage. So she lost 9k out of her income, while added 24k to the annual budget.

I have personally seen cases where the wife was working part time, making 10k per year, so in case of disability the added "income" (in reality the mortgage payment) was higher than the total income the applicant had. Would those clients be better of without mortgage insurance?
Andre Oliveira - Mortgage Agent
Mortgage Intelligence - FSCO# 10428
Newbie
Apr 14, 2013
5 posts
1 upvote
Getting an insurance policy when you purchase a home is for the protection of your investment and family.There are many products available, but you need to address the main concerns, death, illness, critical illness, transfer of a policy from lender to lender. Once you know what you want get a few quotes and ask plenty of questions.

-Mortgage Insurance is offered by banks ,mortgage brokers and companies like Mortgage Protection Plan.
-Critical illness can be offer by by these services as well as an independent Insurance agent.
-A Term or or whole life insurance policy is generally offer by independent Insurance agent.
Ratehouse,ca can give you some good quotes for term and whole life insurance from Sunlife Insurance.
No the banks do not scam you on Insurance products, they only provide what the consumer needs.

Top

Thread Information

There is currently 1 user viewing this thread. (0 members and 1 guest)